Aneel changes tariff flag to red, with reservoir levels falling

Brazil map

Brazil’s power regulator Agencia Nacional de Energia Eletrica (ANEEL) has reactivated the power tariff flags and set the red flag (level 2) for December, with a cost of BRL6.24 (US$1.19)/100 kWh, the agency said.

The tariff flag system signals generation conditions and costs to power consumers. When production at hydro plants — whose energy is cheaper than that of thermoelectric plants — is favorable, ANEEL activates the green flag. Under worse conditions, the yellow or red flags (level 1 or 2) may be activated.

In May, as the COVID-19 pandemic peaked in the country, the watchdog planned to keep the green flag until Dec. 31, but a fall in water reservoir levels combined with the recovery of electricity consumption motivated the change.

“It is important that consumers seek to avoid water and energy waste,” ANEEL’s general director, André Pepitone, said in a statement.

Ana Carolina Silva, a manager at Thymos Energia, believes ANEEL took the decision to increase power tariffs now to preserve power distributors, which were affected by the power consumption drop during peak social distancing, while avoiding more aggressive tariff reviews in 2021. “The red flag system involves residential and industrial consumers in the captive (regulated) market, so this could stimulate those who are eligible to migrate to the free market,” she told BNamericas.

Silva added that it is unlikely that Brazil returns to the green flag by January. “Possibly to the red flag’s level 1 or yellow flag, since the PLD [spot power price index which reflects hydrological conditions] is at its highest level,” she said.

According to grid operator ONS, Brazil’s electric power load is expected to grow 4.4% in December 2020 from a year earlier, driven by growing industrial activity and high temperatures.

Earlier this week, the electric power commercialization chamber (CCEE), the ONS and state energy research company EPE said that Brazil’s power load is to increase by 3.6% a year, on average, between 2021 and 2025. In 2021, the load is projected to grow 3.4%, considering an increase of 3.3% in the country’s GDP. 

This year, Brazil’s power load is expected to be 66,793 MWa, up 1,019 MWa from last year’s second four-month forecast and down 1.5% compared with 2019. 

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