Threat of Competition: Moderate to High

The Brazilian electricity sector is many ways at the mercy of ANEEL. ANEEL sets tariffs throughout the country and works in the interest of end users. ANEEL’s tariff review process is very strict and is centered on operational efficiency. Such a focus on operational efficiency and cost reductions has intensified rivalry. Also, government incentives for producers of alternative energy may also contribute to levels of competition within the industry. Finally, lack of product differentiation in the utilities industry as a whole, along with the high fixed costs and exit costs, intensify rivalry.

Threat of New Entrants: Low

In the electricity market, operating and owning power generation facilities requires large financial outlay and intensive capital to set up and operate hundreds of power plants. Even though utility companies largely draw customers on price, which allows them to utilize price undercutting as an entry strategy, the competitive landscape in which these companies operate is difficult to penetrate, making entry difficult.

Threat of Substitutes: Low

Technically, there are almost no alternatives to electricity. Thus being said, there are different methods for producing electricity. For power generating companies within Brazil’s electricity industry, alternative forms of producing electricity pose a potential switching cost if the alternative forms eventually become operational norm. Of course, end consumers could turn self sufficient by use of solar power, though this is unlikely to happen considering the high costs of solar panels. Once again, there are almost no alternatives to electricity. With that in mind, the threat of substitute product offerings in the industry is very low.

Power of Suppliers: Low to Moderate

The Brazilian electricity is characterized by strict regulations swayed in favor