In this second article on crisis management, we deal with the industry of electricity, in which public service concessionaires face increasingly complex challenges, especially in adverse weather conditions – such as excessive rainfall – whose recurrence is aggravated by climate changes and global warming.
Allied to the increase in the frequency and intensity of these climatic events, which impose higher pressure on the electricity infrastructure, there is also the growing politicization of debates involving the electricity business and in companies that have undergone privatization processes.
In this context, it is necessary that companies in such sector prepare adequately for a crisis– whether due to events originating in energy generation, transmission or distribution.
As a heavily regulated business, the electricity industry has a series of legal obligations that must be strictly followed by utilities. These obligations are constantly changing and have accompanied the growing need to adapt to extreme weather events, which are increasingly frequent.
As an example, the National Electric Energy Agency (Aneel) initiated the Subsidy Taking 002/24 (TS 002/24), as a result of Technical Note 7/2024-STD-SFT/Aneel. The aim is to assess the need for regulatory intervention for these events, addressing the regulation of services and criteria for the application of variable overdue feed to unavailability.
The technical note also mentions the need to review companies' contingency plans and deals with the definition of cut off in an emergency.
To deal with crisis situations, such as in the event of a blackout due to extreme weather events, there is Normative Ordinance 61/GM/MME, of March 13, 2023, which instituted the General Protocol for Security and Crisis Management of Infrastructure Assets of Electric Energy, Mining, Oil and its by-products, Natural Gas and Biofuels (PGC), like others the Crisis Management Committee (CGC).
The PGC defines preventive and responsive actions for situations that compromise the integrity or availability of services. The CGC, on the other hand, has the function of monitoring and proposing strategic actions, categorizing incidents, establishing response procedures, and defining the contents of communications during crises.
An effective preparation for a crisis, however, requires more than organization (highly recommended) and strict compliance with regulation – especially because, as a rule, the triggers and legal statutory requirements are focused on technical and operational aspects, not on legal developments and actions that, if taken, could mitigate losses.
An example of this is the assessment of energy supply and risks of possible blackouts or unavailability of equipment of companies operating in the business. If carried out as an effort to prepare for a possible crisis, this assessment can help avoid major inconveniences.
Likewise, efforts to structure, guide and organize that allow open, direct and secure communication with the regulator and society have a lot to add.
If, instead of making their communications as a mere compliance with regulatory requirements, companies strive to share more detailed information with the State, the public authorities will be effectively able to employ efforts in a mobilization to furnish any gaps pointed out.
In both examples, the efforts mentioned can not only deliver immediate and noticeable results to companies, but also contribute considerably to mitigating risks and losses in the event of critical events.
Being prepared for a crisis (and knowing how to act before and in the face of it) is relevant to make the right legal decisions, which results in effective responses, capable of controlling the situation that the company is experiencing at that time.
In short, from a legal point of view, proactive action by companies in the electricity business to contribute to the system and mitigate the chances of a cut off in the regular energy supply may lead for them not being held responsible for unforeseen events (or at least mitigating the losses), such as extreme weather events.
Therefore, in the face of the challenges of the electricity business – in which innovations and improvements go hand in hand with higher pressure in general – strategic, critical and provocative preparation can prove to be a relevant ally of companies in managing a blackout, for example.
It is true that the legal departments do not have the power to properly avoid a blackout, an eminently technical issue. However, they can greatly contribute in advance to mitigate the effects of a crisis, especially by making a critical assessment of the potential legal consequences and advising on actions capable of minimizing damages in the civil, administrative, regulatory, and criminal spheres.
