Brazil scraps progress on power modernization bill

Brazil is scrapping all progress made so far on its power sector modernization bill (PL 414) and will begin discussions on it anew, meaning any changes are unlikely to be approved this year.

Lower house president Arthur Lira (Progressistas party, Alagoas state) announced the creation of a congressional group to discuss the bill, a setback to nearly four years of discussions.

The bill was expected by some to be approved as soon as June through a negotiated plan to bring the bill straight to plenary voting before lawmakers adjourned to prepare for the October national elections.

But a source closely following negotiations told Argus the main obstacle to an emergency vote before June was the demand among some lawmakers for natural gas pipeline construction costs to be be included in power surcharges, which are paid by all power consumers in the country.

Natural gas pipeline construction costs became an issue with the Eletrobras' privatization bill, which required gas-fired thermal power plants to be built in northern and northeastern states. How to pay for the pipelines to connect those plants was an open question, however. This prompted the companies with the concessions to provide that gas to push lawmakers to include the costs in the power bill.

PL 414 aims to update the regulation and trading rules for the power sector in order to allow for a transition to a full competitive market. Currently, residential power consumers cannot freely choose their power supplier, only large consumers.

By Flávia Pierry