Brazil approves extra increase in power bills

Electric power bills in Brazil will see an extra increase amid the worst drought in the country for over 90 years. 

During a meeting on Tuesday, the directors of electric power watchdog Aneel approved a readjustment to its tariff flag system, with the red flag (level 2) jumping from 6.240 reais (US$1.26)/kWh to 9.492 reais/kWh in July, up 52%. 

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

Aneel projects that the red flag (level 2), which has been in effect since the beginning of June, is likely to be maintained until November. 

The agency’s board also decided on new values for the other flags. The yellow flag rate will be 1.874 reais/kWh (up 39.5%) and red flag level 1, the probability of which is relatively low in the coming months, will be 3.971 reais/kWh. The green flag tariff is zero. 

In May 2021, the national weather forecast system issued a water emergency alert for the hydrographic region of the Paraná basin, which accounts for more than 50% of the water storage capacity for hydroelectric generation in the country and covers Minas Gerais, Goiás, Mato Grosso do Sul, São Paulo and Paraná́ states.

“We are 62% dependent on hydroelectric plants. As a consequence, we have a thermal park that works as insurance, the cost of is modeled by the tariff flags,” Aneel’s general director André Pepitone pointed out during the meeting.  

WATER AND ENERGY SAVINGS

In a public speech on Monday, Brazil’s mines and energy minister Bento Albuquerque said the government is finalizing the design of a voluntary program that encourages companies to shift consumption from times of high energy demand to those of lowest demand in the second half of the year, without affecting their production and the country's economic growth.

“However, in order to increase our energy security, it’s essential that, besides the commerce, services, and industry sectors, Brazilian society, every citizen-consumer, participates in this effort, avoiding wasted consumption of electricity,” Albuquerque said. 

PROVISIONAL MEASURE

President Jair Bolsonaro sent the national congress a provisional measure (MP) on Monday that allows the adoption of exceptional and temporary measures to optimize the use of hydroelectric resources in the face of the current water shortage and its consequences on the security of energy supply.

The MP creates a chamber of exceptional regulations for hydropower management (CREG), formed by the ministers of mines and energy, which will chair it; of economy; of infrastructure; of agriculture, livestock and supply; of environment; and of regional development. The CREG is responsible for defining mandatory guidelines for the establishment of exceptional and temporary conditions for the operation of the reservoirs of the country's hydroelectric plants, involving definitions for limits on usage, storage and flow rates.

It also enables the contracting of reserve capacity, exceptionally through simplified competitive processes to be regulated by the mines and energy ministry (MME). “This measure seeks to provide timely reliability to the electricity system, with appropriate allocation of costs and risks related to the entire market that will benefit from this systemic service,” the MME said in a statement.