With hydroelectric production low, Brazil set to approve another hike in power prices

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Brazilian power sector regulator Aneel is expected to announce another hike in power prices this week, a source who wishes to remain anonymous told BNamericas.

This will be the second change to the tariff flag system in less than two months. The last one was approved at the end of June, with the red flag (level 2) tariff jumping from 6.240 reais (US$1.26)/kWh to 9.492 reais/kWh in July, a 52% increase. The same price level was maintained in August. However, given the increased use of thermoelectric power amid a record drought, a new hike is regarded as necessary.

The tariff flag system indicates generation conditions and costs for power consumers. When production at hydro plants — whose energy is cheaper than that of thermal plants — is favorable, Aneel activates the green flag. When there is lower water availability, the yellow or red flags (level 1 or 2) may be activated, thus increasing prices. 

When contacted by BNamericas, a spokesperson for Aneel said the matter will be discussed at Tuesday’s public board meeting.

According to the mines and energy ministry (MME), actions taken by Aneel in the generation, transmission and distribution segments have resulted in 18.8 billion real relief, avoiding a 20% rise in power bills this year. “With the measures taken, the adjustments in 2021 are being reduced to just over 8% on average for residential customers,” the MME said in a public statement on Thursday.

But the scenario remains negative, including for next year. With most of the country suffering low rainfall, the main causes of pressure on the tariffs are forecasts that the IGP-M inflation index will remain at high levels in the first half of 2022, forcing readjustments of old distribution service contracts, in addition to increase of the dollar against the real.

To avoid excessive increases, the government is working on measures such as reducing taxes on electric power bills and lowering Itaipu’s debt servicing, expected to begin in 2022, and advancing funds from the privatization of Eletrobras in the form of a contribution to the budget of the energy development account (CDE).

“With commitment and coherence, the MME will maintain firm and diligent action so that the Brazilian society can benefit from supply of electric energy with security and accessible prices in 2022,” MME said.

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Elizabeth Ingram is content director for the Hydro Review website and HYDROVISION International. She has more than 17 years of experience with the hydroelectric power industry. Follow her on Twitter @ElizabethIngra4 .

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