1. IURPA JULY 2003 IURPA - OCTOBER/2001 REVENUE PROTECTION IN BRAZIL SOME INFORMATION, FEW CERTANTIES AND MANY DOUBTS

2. IURPA JULY 2003 IURPA - OCTOBER/2001 Introdução §Informe o motivo da discussão §Identifique-se BRAZIL OVERVIEW 8,500,000 SQUARE KILOMETERS 62 ELECTRIC UTILITIES ONLY 5 ARE NOT PRIVATIZED AROUND 180 MILLION INHABITANTS AROUND 53 MILLION CUSTOMERS

3. IURPA JULY 2003 IURPA - OCTOBER/2001 BRAZILIAN ELECTRIC GRID SYSTEM WE USE ABOUT 13% OF THE TOTAL ENERGY USED IN THE U.S.A. 95% OF OUR ELECTRIC ENERGY COMES FROM HYDROELETRIC POWER PLANTS OUR NATIONAL ELECTRIC SYSTEM IS INTEGRATED

4. IURPA JULY 2003 IURPA - OCTOBER/2001 NON-TECHNICAL LOSSES TOTAL (TECHNICAL AND NON-TECHNICAL) LOSSES: BRAZIL AVERAGE 20% NON-TECHNICAL LOSSES: FROM ABOUT 0.5% UP TO 30% (DEPENDING ON THE UTILITY) TOTAL NON-TECHNICAL LOSSES: 2.1 BILLION US$ / YEAR

5. IURPA JULY 2003 IURPA - OCTOBER/2001 SINCE 2001 THE NON TECHNICAL LOSSES ARE INCREASING MAIN CAUSES ELECTRICITY RATIONING PERIOD (RULES TO DECREASE CONSUPTION) - FROM JUNE 2001 TO APRIL 2002 GENERAL ECONOMIC PROBLEMS TARIFFS ARE INCREASING (CURRENTLY AROUND U$S 150.00 PER MWh)

6. IURPA JULY 2003 IURPA - OCTOBER/2001 WHY UTILITIES ARE FAILING THEY WANT VERY EFFECTIVE RESULTS WITHIN A SHORT PERIOD OF TIME THEY GO IN ONE DIRECTION ONE YEAR BUT CHANGE IT (18O DEGREES) THE NEXT YEAR MOST PRIVATIZED UTILITIES HAVE IMPLEMENTED STRONG DOWN SIZING ACTIONS

7. IURPA JULY 2003 IURPA - OCTOBER/2001 WHY UTILITIES ARE FAILING THE NEW EMPLOYEES DO NOT HAVE STRONG LINKS WITH THE UTILITY THEY DO NOT INVEST IN TECHNOLOGY (RESULTS DO NOT COME FAST ENOUGH)

8. IURPA JULY 2003 IURPA - OCTOBER/2001 SOME CHALLENGES MANY PEOPLE ARE SELLING FRAUDULENT SERVICES (FORMER UTILITY EMPLOYEES?) FRAUDS ARE VERY WELL PLANNED AND EXECUTED FRAUDS USING STOLEN (OR BOUGHT) SEALS FROM UTILITIES

9. IURPA JULY 2003 IURPA - OCTOBER/2001 SOME CHALLENGES FRAUDS INVOLVING ELECTRONIC METERS

10. IURPA JULY 2003 IURPA - OCTOBER/2001 RELEVANT INFORMATION STOLEN SEALS NETWORKING INVOLVING EMPLOYEES “SPECIAL SERVICES” TO OPTIMIZE INTERNAL INSTALLATIONS INSTALLATION INCREASED CONSUPTION BY 20% AT THE SAME TIME THE FRAUD WAS IMPLEMENTED FIXER IS A “GHOST”

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13. IURPA JULY 2003 IURPA - OCTOBER/2001

14. IURPA JULY 2003 IURPA - OCTOBER/2001 MORE CHALENGES OUR NATIONAL REGULATORY BUREAU OF ELECTRICITY - ANEEL - IS ESTABLISHING A DECREASING LEVEL PROFILE FOR NON TECHNICAL LOSSES FOR EACH COMPANY ABOVE THIS NEW LEVEL UTILITIES CAN NOT CONSIDER NON TECHNICAL LOSSES AS A COST

15. IURPA JULY 2003 IURPA - OCTOBER/2001 THIS MEASURE WILL STOP THE SNOW BALL EFFECT: LOSSES BECOMING COSTS - UNFAIR FOR GOOD CLIENTS THEREFORE, RP AREAS MUST BECOME MORE EFFICIENT IN ORDER TO GET THE EXPECTED RESULTS MORE CHALENGES

16. IURPA JULY 2003 IURPA - OCTOBER/2001 MORE THAN A REVENUE PROTECTION MEASURE, IT IS A WAY TO IMPROVE THE RATIONAL USE OF ELECTRICITY A POSITIVE VIEW OF THIS MEASURE

17. IURPA JULY 2003 IURPA - OCTOBER/2001 LET’S TALK ABOUT SOME CERTANTIES AND DOUBTS

18. IURPA JULY 2003 IURPA - OCTOBER/2001 COMPARING LOSSES FROM DIFFERENT UTILITIES FIRST STEP: MAKE THE ENERGY BALANCE TOTAL ENERGY PRODUCED AND BOUGHT - TOTAL ENERGY SOLD = TOTAL LOSSES TOTAL LOSSES - TECHNICAL LOSSES = NON TECHNICAL LOSSES

19. IURPA JULY 2003 IURPA - OCTOBER/2001 COMPARING LOSSES FROM DIFFERENT UTILITIES SECOND STEP: TAKE THE NECESSARY CARE WE NEED TO ASK ABOUT THE METHODOLOGY USED TO CALCULATE (AND/OR MEASURE) TECHNICAL LOSSES, CONSIDERING: AREA COVERED, RURAL AREAS COVERED, VOLTAGE AND LENGTH OF LINES, QUANTITY OF DISTRIBUTION TRANSFORMERS AND OTHER VARIABLES

20. IURPA JULY 2003 IURPA - OCTOBER/2001 CONSIDERING ALL THESE FACTORS, FOR A GIVEN UTILITY 8% CAN BE A BETTER RESULT THAN 5% FOR ANOTHER ONE TECHNICAL LOSSES

21. IURPA JULY 2003 IURPA - OCTOBER/2001 WE CAN COMPARE. BUT ARE THE NUMBERS RELIABLE??? (THEY DEPEND ON THE WAY WE CALCULATE THE TECHNICAL ONES) THERE ARE LOSSES THAT DO NOT APPEAR IN THE ENERGY BALANCE!!! THE NON TECHNICAL LOSSES PROFILE OVER THE YEARS IS MORE SIGNIFICANT THAN THE NUMBER FOR EACH YEAR = TREND NON TECHNICAL LOSSES

22. IURPA JULY 2003 IURPA - OCTOBER/2001 MAYBE THIS IS A POINT THAT DESERVES IURPA’S ATTENTION WE NEED TO HAVE SOME STANDARDS IN ORDER TO COMPARE NUMBERS FROM DIFFERENT UTILITIES

23. IURPA JULY 2003 IURPA - OCTOBER/2001 TOTAL LOSSES CEMIG X BRAZIL AVERAGE % YEAR

24. IURPA JULY 2003 IURPA - OCTOBER/2001 NON TECHNICAL LOSSES AT CEMIG

25. IURPA JULY 2003 IURPA - OCTOBER/2001 “SETTING UP” FIXERS THE ONLY DEVICE WE NEED IS A VIDEO CAMERA PROPERLY INSTALLED IN A HOUSE

26. IURPA JULY 2003 IURPA - OCTOBER/2001 THANK YOU FOR YOUR ATTENTION LUIZ FERNANDO ARRUDA TEL 00 55 31 33295520 FAX 00 55 31 33295279 arrudalf@cemig.com.br http://www.cemig.com.br