July 1, 2001
Drought, years of inadequate investment and a half-baked liberalization of its electricity sector have pitched Brazil into a full-blooded energy crisis. Since June, most Brazilian consumers have had to cut their power consumption by 20%.
The botched launch of a spot electricity market in 1999, which might have eased the crisis by helping to balance peak supply and demand for power, has made matters even worse. The Electricity Wholesale Market, known as MAE, was designed as a safety valve for the semi-liberalized power system in which distribution was privatized while generators remained largely under state control. Generators or distributors agreed to supply or offtake commitments with
Brazil's plans for a wholesale power market backfired as poor management and weak regulations pushed it to the brink of collapse. The market's difficulties are part of the wider crisis affecting the Brazilian electricity system.