November 10, 2026

Methodological Note on IAML and EPML

Dcide

TR Soluções

1. Objective

This methodological note presents the criteria adopted to build two economic indices focused on the free electricity market.

The IAML — Free Market Attractiveness Index measures the ratio between the break-even price calculated for the reference consumer — that is, the maximum energy price in the Free Contracting Environment (ACL) that would make the free and regulated environments economically equivalent — and the energy forward price, used as the reference for contracting in the ACL. The index is calculated as the ratio between the break-even price and the forward price, so that values above 100% indicate greater economic attractiveness of the free market.

The EPML — Potential Free Market Savings expresses the difference between the break-even price and the forward price as a percentage of the reference consumer's total captive cost, excluding taxes. Together, the indicators make it possible to monitor the relative attractiveness of the contracting environments and to put into perspective the economic relevance of this difference relative to the total captive cost.

The indicators were developed to provide the market with an objective reference on the economic attractiveness of the ACL, compared with the Regulated Contracting Environment (ACR), considering a reference consumer and the distribution companies covered in each calculation, currently 51.

Four indicators are published monthly:

The IAML and EPML indicators should be interpreted as aggregate references of the economic conditions considered in the methodology and, therefore, do not necessarily represent the result for a specific consumer.

The indicators calculated for the incentivized product should be interpreted as references of economic attractiveness for the universe of consumers that retain the right to the tariff benefit associated with incentivized energy. As of 2026, new migrations to the ACL are not entitled to the discount on the use of the transmission and distribution systems associated with incentivized energy, and demand increases by consumers who already hold the benefit do not receive the discount on the additional portion.

The relevance of the incentivized indicators stems mainly from the need to compare the conventional and incentivized products, particularly in light of the creation of the Resource Complement Charge (ECR), which changes the economic attractiveness of the tariff benefits associated with network usage discounts.

2. About Dcide and the forward curve

Dcide is a company specialized in information solutions, energy trading process management and quantitative risk modeling, working particularly with future energy prices (forward curves), with impartiality and neutrality since 2011.

The future price references used to calculate the indices come from the consensus of the mark-to-market curves of Dcide's clients, made available in the Pool Denergia. These clients include the main players in the Brazilian power sector and follow rigorous management and governance processes.

The curve reflects the prices at which market players consider it possible to trade at the time of calculation, based on transactions observed in different environments, liquidity and other market conditions. It is neither a forecast of future prices nor a declarative survey of expectations, and it is used as the main sector reference for future energy prices.

To calculate the indices, the values published on the indicator's base date are used, generally corresponding to the monthly closing curve, net of taxes, charges and commercial components. The monthly curves cover the 36 months of the reference contract (M+6 to M+41), for conventional and 50% incentivized energy sources in the Southeast/Center-West, South, Northeast and North submarkets.

3. About TR Soluções and SETE

TR Soluções is a Brazilian technology company specialized in electricity regulation and tariffs. Its work combines regulatory expertise, tariff modeling, data analysis and the development of proprietary applications, most notably SETE.

SETE — Energy Tariff Estimation Service (Serviço para Estimativa de Tarifas de Energia) is a regulatory and tariff intelligence application developed by TR Soluções and launched in 2011.

The application replicates the tariff calculation of the Brazilian Electricity Regulatory Agency (Aneel), bringing together tariff and regulatory databases, market information, economic and financial components of distribution tariffs, and analytical features for monitoring and projecting electricity distribution tariffs in Brazil.

SETE is continuously updated and improved, incorporating new official data, regulatory changes, approved tariff events, market information and methodological enhancements developed by TR Soluções.

In the context of the indicators presented in this note, SETE is used to estimate the break-even price, the total captive cost, the historical seasonality of the market and the regulatory components applicable to the reference consumer.

4. Methodology overview

The calculation of the indicators considers three main sets of information:

1. Energy forward curves, associated with the submarket of each distribution company;
2. Break-even price, calculated for a reference consumer in each distribution company;
3. Total captive cost, used as the basis for measuring potential savings.

The methodology is built on a monthly basis and considers a horizon of 36 supply months, starting at M+6 and ending at M+41, relative to the calculation date of the indicators.

The national aggregation is not a simple average of the individual results of the distribution companies. The calculation uses a weighting based on the relative consumption associated with each distribution company and supply month. As a result, distribution companies with a larger share of the market considered carry more weight in the national indicators, while smaller distribution companies contribute to the calculation in proportion to their size.

5. Supply horizon

The indicators consider the supply months between M+6 and M+41.

The variable m represents the supply month within the horizon considered, taking values from 6 to 41.

For example, if the calculation date is August 2026:

This approach makes it possible to compare the forward price observed in the market with the break-even price projected for the same supply month.

6. Time referencing of prices

Forward prices are referenced to the base date of the curves used in the calculation of the indices, whereas break-even prices are initially calculated in nominal values for each supply month between M+6 and M+41.

For the purposes of comparing and aggregating the indicators, nominal break-even prices are brought to the same reference base date as the forward curves used in the calculation, using the market-projected Broad National Consumer Price Index (IPCA), according to the expectations published in the Central Bank of Brazil's Focus Report. Forward curves are already expressed on the reference base date considered in the calculation and therefore require no additional monetary adjustment.

Thus, for each supply month, nominal prices are converted to the same temporal reference basis before the indicators are calculated.

In simplified form:

where:

PBE_d,m^ref = break-even price referenced to the reference base date of the index;

PBE_d,m^nom = nominal break-even price for the supply month;

F_m^IPCA = cumulative projected IPCA factor between the reference base date and the supply month;

CTE_d,m^ref = total captive cost referenced to the reference base date of the index;

CTE_d,m^nom = nominal total captive cost for the supply month.

In the formulas presented in the following sections, CF, PBE and CTE correspond to values expressed on the reference base date of the indicators.

7. Reference consumer

The indicators are calculated based on a medium-voltage reference consumer in tariff subgroup A4 and the Blue tariff modality.

The profile adopted is:

This profile was chosen to represent a typical medium-voltage consumer, with a load factor compatible with the Blue tariff modality.

Peak and off-peak contracted demand are kept fixed throughout the calculation horizon. The monthly variation in consumption is represented by the historical monthly seasonality of the medium-voltage market, determined on an aggregate basis for the distribution companies covered in each calculation and calculated from the last three calendar years, applied to the load factors.

8. Treatment of seasonality

Although contracted demand is fixed, the monthly consumption of the reference consumer is not assumed to be constant throughout the year.

To reflect typical market behavior, the reference consumer was assigned a seasonality based on the historical monthly behavior of the medium-voltage market, determined on an aggregate basis for the distribution companies considered in the methodology, using the actual data published by Aneel in SAMP – Balanço.

At the launch date of the indicators, the seasonality corresponds to the calendar years 2023 to 2025, the last three complete years available. The normalized seasonality factors in effect at launch are shown in Table 1.

The seasonality is updated annually in April, after Aneel releases the market information for the previous year.

This seasonality is applied to the reference consumer's profile, keeping peak and off-peak contracted demand fixed. Thus, the monthly variation applies to consumption, through the load factors, and not to contracted demand.

In simplified form:

where:

FC_FP,m = off-peak load factor in month m;

FC_P,m = peak load factor in month m;

FC_FP,base = average off-peak load factor of the reference consumer;

FC_P,base = average peak load factor of the reference consumer;

S_m = historical seasonality factor associated with the supply month.

Seasonality does not change the monthly prices of Dcide's forward curves, which are observed on the respective reference base date. Its effects apply to the reference consumer's monthly consumption profile and, consequently, to the weighting of the quantities used in calculating the indicators. As a result, months with historically higher consumption receive greater relative weight, while months with historically lower consumption receive less weight.

The forward curves used in the indicators represent the energy products taken as the reference for the ACL. Commercial conditions specific to an individual contract, such as flexibility, contractual seasonalization, guarantees and services, may be priced on a customized basis and are not individually represented in the indicators.

9. Relative consumption and weighting of distribution companies

The variable q_d,m represents the relative consumption associated with distribution company d in supply month m.

This relative consumption incorporates two elements:

1. the monthly profile of the reference consumer, adjusted for historical monthly seasonality;
2. the distribution company's share of the total electricity market, considering the captive and free markets together, without restriction to subgroup A4, calculated for the respective month.

Thus, q_d,m works as the weight of each distribution company and month in the composition of the indicators. In operational terms, the relative consumption results from applying the distribution company's share of the total market to the monthly consumption of the reference profile, already adjusted for seasonality. Each distribution company's share of the total market is determined from the monthly market data published by Aneel in SAMP – Balanço.

In simplified terms, q_d,m can be interpreted as the portion of the reference profile's monthly consumption attributed to each distribution company, according to its share of the total market in that month. For example, if the consumption of the reference profile in a given month, already accounting for seasonality, is 100 MWh and a distribution company represents 10% of the total market, the relative consumption attributed to that distribution company will be 10 MWh. In a month of lower seasonal consumption, in which the same profile consumes 95 MWh, with the share remaining at 10%, the distribution company's relative consumption will be 9.5 MWh.

The absolute scale of the reference consumption does not change the results of the indicators when applied consistently to the numerator and denominator of the formulas.

10. Tax treatment

As a methodological choice, the IAML and EPML indicators are calculated without taking taxes into account.

This decision seeks to preserve the simplicity, transparency and stability of the indicators, especially given the differences in tax treatment among consumers, states, consumption classes and tax regimes, as well as the ongoing changes to the Brazilian tax system.

Incorporating taxes would require additional assumptions and continuous monitoring of tax rules that may vary across concession areas and consumer profiles. In addition to significantly increasing the complexity of maintaining the methodology, this treatment could introduce distortions or differences arising from tax assumptions rather than from the actual economic conditions of the free market and regulated tariffs.

Accordingly, all values used in the calculation of the indicators are considered without taxes, including:

• the energy forward price — CF;
• the break-even price — PBE;
• the total captive cost — CTE.

Thus, the IAML and the EPML reflect exclusively the economic, tariff, regulatory and market components considered in the methodology, before tax effects.

Excluding taxes also ensures that the forward price and the break-even price are compared on the same basis, preventing differences in tax treatment from affecting the reading of the indicators.

Consequently, the EPML should be interpreted as an estimate of potential savings before tax effects, and does not necessarily correspond to the net savings actually observed on a specific consumer's electricity bill.

The taxation applicable to each consumer should be considered in individual economic feasibility analyses, according to the consumer's location, consumption characteristics, tax regime and other particularities.

11. Variable definitions

The variables used in the indicators are:

d = distribution company considered in the calculation;

m = index of the supply month within the horizon considered, taking values from 6 to 41;

q_d,m = relative consumption of distribution company d in month m;

s(d) = submarket of distribution company d;

CF_s(d),m = energy forward curve corresponding to the submarket of distribution company d and supply month m;

PBE_d,m = break-even price calculated for distribution company d in month m;

CTE_d,m = total captive cost of the reference consumer in distribution company d in month m.

For both indicators, CF, PBE and CTE are considered without taxes.

12. IAML formula

The IAML is calculated as the ratio between the weighted value of the break-even price and the weighted value of the forward curve.

In conceptual terms:

• the numerator represents the weighted sum of break-even prices;
• the denominator represents the weighted sum of energy forward prices in the ACL;
• the ratio between the two indicates the level of relative attractiveness of the free market.

The IAML is interpreted as follows:

For example, an IAML of 125% indicates that, on the weighted average considered, the break-even price is 25% higher than the ACL forward price, signaling economic attractiveness of the free market.

13. EPML formula

The EPML measures how much the difference between the break-even price and the forward curve represents relative to the total captive cost of the reference consumer.

In conceptual terms:

• the numerator represents the weighted savings associated with the difference between the break-even price and the forward price;
• the denominator represents the weighted total captive cost;
• the result indicates how much this difference represents in relation to the total captive cost.

The interpretation is:

For example, an EPML of 8% indicates that the difference between the break-even price and the forward curve represents approximately 8% of the total captive cost of the reference consumer.

14. Determination of the forward curve

Dcide operates a structured process called the Forward Curve Benchmark, whose main features are:

1. periodic receipt of the mark-to-market curves of the main trading, generation and free consumption players, through a voluntary, standardized process that is representative of market conditions;
2. application of documented and validated statistical procedures to identify and treat values that are unrepresentative, inconsistent or out of line with prevailing market conditions;
3. construction of a consensus curve, which does not reproduce the view of a single player, but represents the point of convergence among multiple independent and economically exposed references.

The individual curves received by Dcide through the Pool Denergia are mark-to-market curves, that is, they express the value considered most representative for closing an energy position under actual market conditions, rather than the price observed in a specific transaction.

This individual information results from prior decentralized processing carried out by the players themselves and by sector experts, incorporating a broad universe of transactions executed on and off trading platforms, as well as other supply and demand factors, such as product liquidity and prevailing credit conditions in the market.

Dcide consolidates these curves centrally, producing an independent, collaboratively built price reference used by companies, government bodies and institutions, financial institutions, investment funds, audit firms, the media and universities for risk assessment, pricing, decision-making, historical tracking and studies.

For the specific purpose of the indices, Dcide's Compiled Curve for the last business day of the month is used, for the four submarkets and for the Conventional and 50% Incentivized sources, generally built from the Monthly Closing calculation and considered, for the purposes of the indicators, over the horizon from M+6 to M+41.

15. Calculation of the break-even price

For each distribution company and supply month, the break-even price is calculated from the average cost of the A4 Blue consumer in the regulated environment and the costs that remain with, or start to be borne by, the consumer in the free market.

First, the average tariff² of the captive consumer is calculated, considering the Distribution System Usage Tariff (TUSD), the Energy Tariff (TE) and the tariff flag surcharge, when applicable. The demand and energy tariffs in the peak and off-peak time periods are converted into an average value in BRL/MWh based on the reference consumer's profile, considering the respective load factors, the number of hours in each tariff time period, seasonality and monthly consumption.

From this value are deducted the portions that the consumer continues to pay, or starts to pay in another form, in the free environment. These include the TUSD applicable to the free consumer — differentiated according to the conventional or I5 incentivized product — and the charges and costs considered in the settlement or accounting of the free market, such as the Reserve Energy Charge (EER), the System Service Charge (ESS), the Capacity Reserve Power Charge (ERCAP), the costs associated with nuclear generation from Angra 1 and 2 and the portion related to losses in the Basic Network (Rede Básica).

As a methodological choice, charges specifically associated with the act of migrating to the ACL are not considered. These components are transitory in nature and relate to the decision to enter the free market, whereas the IAML and the EPML aim to assess the economic attractiveness of the free market as a contracting environment, including for consumers who are already in the ACL. This exclusion also preserves the comparability of the indicators' historical series, preventing circumstantial charges from certain periods from changing their interpretation over time.

After these deductions, the resulting value corresponds to the break-even price, that is, the maximum energy price in the ACL that equals the cost of the reference consumer to the estimated cost in the regulated environment.

In the calculation for the I5 incentivized product, the ECR Factor is applied, relating to the Resource Complement Charge (ECR) established by Law No. 15,269/2025, in accordance with the methodology proposed in Aneel Technical Note No. 145/2026-STR/ANEEL under Aneel Public Consultation No. 028/2026.

The break-even calculation disregards the energy trader's commercial management or representation costs, financial guarantees and adaptation of the metering system.

The PBE used in the IAML and the EPML is calculated on the same comparison basis as the forward curve. CF, PBE and CTE are considered without taxes and, for aggregation purposes, expressed on the same reference base date as the indicators.

16. Conventional energy and incentivized energy

The indicators are calculated separately for conventional energy and I5 incentivized energy, associated with the 50% benefit on the network usage portion considered in the methodology, already taking into account the ECR Factor projected from January 2027 onwards.

In the conventional case, the forward curve considered corresponds to the conventional product in the respective submarket.

In the incentivized case, the forward curve considered corresponds to the incentivized product in the respective submarket, and the calculation takes into account the tariff effects associated with the corresponding benefit, including the ECR estimate.

The purpose of publishing the incentivized indicators is to allow an economic comparison between products in the ACL, especially for consumers that retain the right to the tariff benefit associated with incentivized energy, and to track the evolution of its attractiveness relative to the conventional product.

As of 2026, new migrations to the ACL are not entitled to the discount on the use of the transmission and distribution systems associated with incentivized energy. Likewise, demand increases by consumers who already hold the benefit do not receive the discount on the additional portion.

17. Calculation, updating and publication of the indicators

The IAML and the EPML are published monthly on the 10th of each month. When the 10th falls on a weekend or national holiday, publication takes place on the next business day.

For each publication, Dcide's forward curves for the previous month's closing are used. Publishing on the 10th makes it possible to reconcile the closing schedule of these price references with the calculation process of the IAML and the EPML, so that the indicators are calculated from an already consolidated monthly reference.

The indicators are calculated on a date prior to their publication.

For each calculation, the databases, projections, parameters and methodologies available in the version of SETE in effect on the calculation date are used.

The calculation date and the SETE version used in each calculation are disclosed together with the monthly publication of the indicators, making it possible to identify the assumptions and data available at the time the calculation was performed.

The history of SETE versions and updates can be found in the SETE release history.

The indicators are updated based on a combination of:

• Dcide forward curves for the monthly closing calculation;
• updated tariff projections;
• updated market data;
• annual update of historical seasonality;
• updated IPCA expectations from the Focus Report;
• review of the parameters used in the calculation for the reference consumer;
• updated sector charges, tariff components and other regulatory assumptions used in SETE.

Identifying the SETE version ensures the traceability of the assumptions used in each publication, given that tariff projections, market data, charges and other regulatory parameters may be updated over time.

18. Aggregation by weighted sum

The methodology does not use a simple average of the individual indices by distribution company. This choice prevents distribution companies of very different sizes from having the same weight in the national indicator.

Aggregation is performed by summing the weighted portions:

• q_d,m×PBE_d,m
• q_d,m×CF_s(d),m
• q_d,m×(PBE_d,m−CF_s(d),m)
• q_d,m×CTE_d,m

Only after this aggregation are the indicators calculated.

This procedure preserves the economic representativeness of the distribution companies and reduces the risk that tariff fluctuations at distribution companies with a small market share will distort the national result.

19. Limitations and assumptions

The indicators should be interpreted as aggregate market references, built from a reference consumer and standardized assumptions.

They do not replace an individual contracting or migration analysis for a specific consumer.

The main limitations include:

• the consumption profile is standardized;
• the tariff subgroup is A4;
• the tariff modality considered is Blue;
• seasonality reflects average historical behavior, and not necessarily the actual profile of an individual load;
• no taxes of any kind are considered;
• specific costs of trading, representation, financial guarantees, metering system adaptation and commercial management are not fully represented by the indicators;
• the incentivized indicators represent the economic attractiveness of the product for consumers that retain the respective tariff benefit;
• the final modeling of the ECR depends on Aneel regulations;
• the indicators reflect attractiveness over the horizon considered, from M+6 to M+41, and are not a contracting recommendation for a specific case.

Consumers with different profiles in terms of demand, load factor, tariff modality, subgroup, tax regime or contracting strategy may obtain different results.

20. Methodological summary

In simplified terms, the methodology can be summarized as follows:

1. A reference consumer in A4 Blue is defined.
2. Historical monthly seasonality is applied to the consumption profile, keeping contracted demand fixed.
3. For each distribution company and supply month, the weighted relative consumption q_d,m is calculated.
4. Each distribution company is associated with the forward curve of its respective submarket.
5. The break-even price and the total captive cost are calculated for each distribution company and month.
6. The IAML is calculated as the ratio between the weighted sum of break-even prices and the weighted sum of forward prices.
7. The EPML is calculated as the ratio between the weighted savings and the weighted total captive cost.
8. Four indicators are published monthly: IAML Conventional, IAML Incentivized, EPML Conventional and EPML Incentivized.

¹ A4 corresponds to connections at voltages greater than or equal to 2.3 kV and less than or equal to 25 kV, pursuant to Article 2, item XXIII, of Aneel Normative Resolution No. 1,000/2021.

² To calculate the A4 Blue average tariff from the demand and energy tariffs in the peak and off-peak time periods, the load factors of each tariff time period, the number of hours corresponding to each time period in the month, seasonality and total monthly consumption are taken into account.