Subject: New Lawsuit Against ANEEL and Furnas
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Fri, 23 Mar 2001 05:18:00 -0800 (PST)

As I indicated in my earlier phone-mail message, Elektro would like 
authorization to bring two suits in Rio de Janeiro against ANEEL (the 
Brazilian regulatory agency) and Furnas (a federal company acting as agent 
for power sales from Itaipu).  These suits would be based on these entities' 
failure to allow Elektro to pass through certain increases in the cost of 
electricity to its customers.  Despite lengthy negotiations, the parties have 
been unable to resolve their differences and it appears that a court 
challenge is the only way forward.
 As I mentioned (long-windedly) in my phone mail, the first suit would relate 
to an 8% increase in the price of electricity which Elektro has been 
prevented, due to the procedural wrangling and subterfuge of ANEEL, from 
immediately passing on to its customers.  By way of background, Elektro must 
buy in excess of 4% of the electricity produced by Itaipu.  ANEEL has 
authorized Furnas to increase the cost of Itaipu's electricity by 
approximately 8%.  Elektro believes that, pursuant to its concession 
contract, it should be able to immediately pass this extraordinary increase 
along to its customers.  Instead of allowing this pass-through, ANEEL has 
required Elektro to wait for the date of its annual rate adjustment to 
receive the increase.  In the meantime, Elektro is required to absorb the 8% 
increase with no retroactive adjustment available allowing it to recoup the 
increase. It is my understanding that during the months before the rate 
increase is authorized, Elektro loses approximately $80,000 per month.  
Accordingly, Electro would like to file suit to obtain declaratory relief: 
(i) supporting the immediate pass-through of any rate increase, and (ii) 
injunctive relief to prevent imposition of sanctions and/or interest.  
 The second suit contemplated by Elektro would involve not just the 8% 
increase mentioned above but also would involve other increases that Elektro 
has had to bear without the benefit of an immediate pass-through to its 
customers. Since 1999, in disregard of both the parties' agreement and the 
law, Elektro has been denied immediate pass-throughs for a number of 
increases in the cost of electricity, related taxes and other legal 
encumbrances.  According to Elektro's calculations, the amount in dispute in 
this "bigger picture" litigation is approximately $42 million.  
 Mr. Bermudes' firm believe that the chances of winning both suits are very 
high and, on the "bigger picture" suit has already provided this opinion in 
writing.  Other than the possible negative impact on Elektro's relationship 
with ANEEL and the length of time the court in Rio could take to decide the 
matter (5-6 years) the downside to initiating the litigation does not seem 
great.  According to Elektro, these suits would not jeopardize Elektro's 
agreement to sell electricity and would result in nominal interest and 
penalty should they prove unsuccessful. 
 Please let me know if Elektro is authorized to proceed as set forth above. 
Thanks.