On November 21, 2017, the Energy Regulatory Commission ("CRE") published in the Federal Official Gazette, the administrative provisions (the "Provisions") that contain the interpretation criteria of the concept "own needs", established in article 22 of the Power Industry Law ("LIE"), and which describes some applicable aspects to the activity of Isolated Supply.

CRE interprets the concept of “own needs” established in the LIE with the aim to guarantee legal certainty and and with the aim of clarifying the operation of:

    I. the power generation under the modality of Isolated Supply, whose power plants may or may not be interconnected to the National Transmission Network (the "RNT") or to the General Distribution Networks (the "RGD");

    II. the acquisition of electricity and Associated Products, under the Basic Supply User category.

According with LIE, Isolated Supply, is the generation or importation of electricity for satisfying its "own needs" or for export, without conveying such energy through the RNT or RGD, the Provisions establishes the definition of "own needs" as the electricity generation consumed by the Load Centers of an entity, or a group of entities, that belong to the same economic interest group.

The Provisions considers that there is an economic interest group when legal control, related interests and the coordination of activities may be demonstrated by the following assumptions: (i) when an entity, directly or indirectly, is the holder or owner of more than 50% of shares of stock the company; (ii) when an entity has shares of stock with full voting rights; (iii) when the commercial activities of one or several companies are carried out with the company that exercises control, among others.

Therefore, because of this interpretation, the sale of electricity and the Associated Products is allowed through power purchase agreements (PPA) between the members of the economic interest group.

Likewise, to allow independent third parties (Suppliers) of the economic interest group to meet the needs of the Load Centers and commercialize the electricity of the Isolated Supply power generation scheme, the Provisions also establishes the definition of Local Generation that refers to the generation or importation of electricity for satisfying one or more end users that belong or not to the same economic interest group or for exports, when the electricity may conveyed through the RNT or RDG for the sale of surplus or purchase of missing power and Associated Products.

According to the applicable framework for the Wholesale Electricity Market Participants, some of the different activities and obligations that the Suppliers and the Generators (or their representatives) can develop are also established in the Provisions (therefore, it includes the schemes in which the power plants and the Load Centers are exclusively connected to particular networks).

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