1. Introduction
The 2026 Capacity Reserve Auction in the form of Power (“LRCAP 2026”) is intended for the contracting of power from new and existing natural gas-fired thermoelectric generation projects, existing coal-fired projects, and the expansion of hydroelectric projects. The Guidelines and System for conducting the Auction were defined by the Ministry of Mines and Energy (“MME”) through Ordinance No. 118/2025 (“Ordinance No. 118/2025”) and, in January 2026, were amended through MME Normative Ordinance No. 125/2026 (“Ordinance No. 125/2026”).
Eight products will be traded in the 2026 LRCAP:
- Thermal Power Product 2026, 2027, 2028, 2029, 2030, and 2031 without operational inflexibility; and
- Hydroelectric Power Product 2030 and 2031.
The Capacity Reserve Power Contracts (“CRCAPs”) will have supply terms of: (i) ten years for the Thermal Power Products 2026 and 2027; (ii) ten years for existing projects; (iii) fifteen years for new projects in the 2028, 2029, 2030, and 2031 Thermoelectric Power Products; and (iv) fifteen years for the 2030 and 2031 Hydroelectric Power Products.
2. Main Changes Introduced
2.1. Flexibility in Contracting Natural Gas Transportation Capacity
The main change brought about by Ordinance No. 125/2026 refers to the reduction in the requirement to contract firm natural gas transportation capacity for thermoelectric projects connected to the Natural Gas Transportation System (STGN).
Prior to the change, owners of thermoelectric projects connected to the STGN were required to submit a commitment to contract firm transportation services for the supply of natural gas, which would enable the project to operate at maximum capacity on a continuous basis.
Now, owners of thermoelectric projects connected to the STGN must submit a commitment letter to contract firm natural gas transportation services, enabling at least 70% of the project’s operation at maximum capacity and on a continuous basis. This impacts competitiveness between projects connected and disconnected from the transportation network, as well as affecting the revenue prospects of natural gas carriers, which may result in impacts on tariffs for other users.
Although there has been a reduction in the contracting of transportation services, projects contracted under LRCAP 2026 remain required to demonstrate operational flexibility that meets all of the dispatches defined in the daily schedule established by the National Electric System Operator (ONS). In other words, although the contractual requirement has been reduced to 70%, entrepreneurs remain obliged to meet 100% of ONS dispatches.
Thus, it is understood that this change represents a significant relaxation of the requirements for participation in the auction, capable of:
- Reducing the costs of entering the auction for participants;
- Facilitating the viability of natural gas-fired thermoelectric projects;
- Increasing the competitiveness of the auction;
- Allowing greater flexibility in the structuring of gas transportation contracts.
2.2. Change in Rules on Natural Gas Transportation
Prior to the change, if transportation products compatible with the deadlines of August 1, 2026, and August 1, 2027, were not available, the obligation to contract for entry and exit transportation capacity would be for the longest term approved by the National Agency of Petroleum, Natural Gas, and Biofuels (“ANP”).
Now, if transportation products compatible with the above deadlines are not available, the obligation to contract outbound transportation capacity will be for the longest term approved by the ANP.
The amendment eliminates the requirement to contract inbound transportation capacity, maintaining only the obligation related to outbound transportation. This change:
- Simplifies the obligations of thermoelectric entrepreneurs;
- Potentially reduces transportation costs;
- Aligns with the general flexibility promoted by the new Ordinance.
In addition, on January 30, the ANP approved the application of a 15% discount on the exit capacity tariff for firm contracts with a term of ten years or more. The benefit will be applied equally to all exit shippers that meet the same objective eligibility requirements, regardless of size, segment, or location.
The measure aims to increase the competitiveness of natural gas-fired thermoelectric plants in the auction, as the discount brings transportation costs closer to competitive levels, reducing the fixed value embedded in bids.
2.3. Extension of Registration Deadlines
Finally, Ordinance No. 125/2026 changed the deadline for reporting, through the Energy Generation Project Monitoring (“AEGE”), (i) the parameters and prices that make up the Variable Unit Cost (“CVU”) portion; and (ii) the commitment agreement for contracting firm transportation services for the supply of natural gas, referring to new and existing natural gas-fired thermoelectric projects. The deadline previously set for December 12, 2025, was extended to February 2, 2026.
The extension of the deadline allowed for:
- The granting of approximately 52 additional days to entrepreneurs;
- More time for planning and structuring proposals; and
- Adaptation to any necessary adjustments resulting from regulatory changes.
The auction is scheduled to take place on March 18, 2026.