Assessing decision on the Brazilian wholesale energy market: the environment

As the wholesale energy market replaces the "Cooperative Trading Model" decision making becomes riskier in Brazilian electrical industry. Exposure to spot price may severely impact utilities cash flow, since price volatility is unavoidable for hydropower-oriented generation systems. Initial contracts were set for transition to the competitive model from Jan 2000 through Dec 2005. As these contracts vanish, generators will try to make their tariff higher and distributors will try to buy energy as cheap as possible. This competitive environment established among generators and distributors is mathematically represented and discussed in this paper. In addition, decision making is assessed and discussed for different scenarios of spot price evolution.