Holdouts forcing Brazil to alter rate cut scheme

Brazil’s new set of controversial sweeping energy tax sector reforms will slash residential and industrial power rates by 16.7%, beginning February 2013, HydroWorld.com has learned.

The measures were intended to help spur the country’s lagging economy by offering hydropower operators, transmission companies and distributors an opportunity to renew existing energy concessions in return for lowered rates.

The deadline for utilities to accept contracts for concessions expiring in 2015-17 ended December 4, though several companies have refused to accept the government’s terms.

According to Brazil’s Ministry of Mines and Energy, 100% of the country’s transmission companies have accepted the concessions, versus just 60% of generators.

Amongst those who have refused are Companhia Energetica de Sao Paulo (CESP), Companhia Energetica de Minas Gerais (CEMIG), Companhia Paraense de Energia (COPEL) and Centrais Electricas de Santa Catarina S.A. (Celesc).

In all, 10.2 GW of the 25.4 GW-worth of the hydropower generating capacity up for renewal went unclaimed by the four companies, who said indemnity payments for unamortized assets were not enough to offset the government’s forced revenue cuts.

The reduction falls slightly short of President Dilma Rousseff’s target average of about 20% that was announced in September.

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