The Brazilian government will allow power distribution companies to more regularly use bonuses the Itaipu Binational hydropower plant earns by selling power on the spot market to reduce their rates.
The bonus, currently estimated at around R600mn ($105mn) by the Ministry of Mines and Energy, will be accessible to distribution companies several times throughout the year to use to smooth out price fluctuations and avoid tariff increases to consumers of all types in Brazil's southern, southwestern and midwestern regions.
Power regulator Aneel will decide the details for how often distributors can tap the funds.
Before the decree, signed this week by Brazilian president Jair Bolsonaro, the bonus Itaipu earned from selling electricity in the spot market and other issues were recognized by Aneel just once a year. At that time it could be used by distribution companies to reduce electricity bills for low-income consumers. The new decree allows distribution companies to tap those funds more frequently, possibly every month, and use it to mitigate tariff increases for customers in all income ranges.
Distributors in those three Brazilian regions are obliged to purchase predetermined amounts of electricity from Itaipu in dollars, with exchange rates impacting the size of the bonus. With the Brazilian real trading stronger to the dollar for much of 2021, distribution companies may see less cash flow this year. Distributors can also only compensate for higher exchange rates once a year, in their tariff review, when those differences are passed on to their consumers.
The Brazilian government announced the measure to soften the impact of power prices during the Covid-19 pandemic, allowing for "tariff relief". But the measure is being viewed skeptically by some, since the bonus from Itaipu is not paid out regularly and can actually have a negative balance by the end of a 12-months period.
In case of a negative balance, distributors that benefited from earlier payments will have to take on a share of the debt in proportion of the amount used.
By Flávia Pierry
