Aneel to include IPCA in rate adjustment

Brazil's electricity regulator Aneel plans to use the IPCA inflation index in the calculation of distributors' annual rate adjustments, O Estado de Sao Paulo reported. The index will be used alongside the current IGP-M inflation index currently in use. The IGP-M, compiled by the Fundacao Getulio Vargas, is one of highest indexes used in Brazil for measuring inflation, and for this reason has been strongly criticized by politicians and consumer defense organizations. Aneel plans to apply the IPCA, the index used by the National Statistics Bureau (IBGE) and by the central bank for inflation targeting policies, on the labor component used for calculating the X-factor, an indicator used to transfer the distributors' productivity gains to consumers. The National Energy Policy Council (CNPE) recommended the change in the calculation earlier this year. In the past 12 months, inflation measured by the IPCA stands at 11.02% while the IGP-M, puts it at 12.09%. In 2002, the IPCA was 12.53%, and IGP-M was 25.3%.