Electricity bill became a parallel budget of the Union, says former Secretary of Mines and Energy

With 36 years of experience in the energy sector, engineer Paulo Pedrosa is known in the sector for his persistence in defending measures that can reduce the electricity bill.

He is in every debate on the subject, as president of Abrace (Brazilian Association of Large Industrial Energy Consumers and Free Consumers). But he was also involved in the issue in the public positions in which he served, as general director of Aneel, the sector agency, and executive secretary of the MME (Ministry of Mines and Energy).

In his opinion, the 17% to 18% ceiling on ICMS is welcome, but it needs to be followed by a structural change.

“In our view, a more effective move would be to remove from the account what should not be there. They are public policies that the consumer does not know he is paying for”, he says.

“Abrace identified that ‘country clubs’, country clubs, benefited from subsidies from the rural area as if they were rural producers. Imagine the situation. country club of a much richer guy.”

Pedrosa argues that the costs of social policies, regional development and incentive policy for sectors and companies, which today make the electricity bill more expensive, should be transferred to the Union Budget.

At the same time, says Pedrosa, Congress needs to approve Bill 414, which provides for the modernization of the sector.

“The project creates the instruments for the price to be, in the future, formed in the market, based on supply and demand, as is already the case in other countries”, he says.

What difference makes the ceiling on ICMS for the electricity consumer?

I understand that Congress gave priority to the energy issue. An important movement has begun. It is a step that mitigates the cost, but it is not the structural confrontation of the problem.

Taxes are about 30% of the electricity bill, almost a third of the problem. Why just mitigate?

Yes, it’s a lot. However, in our view, a more effective move would be to remove from the electricity bill what should not be there. These are public policies that consumers do not know they are paying for.

This movement of removing what is hidden in the electricity bill is better than reducing taxes.

First, because when you decrease the electricity bill, you are automatically decreasing the tax, because it will be levied on a lower base.

Second, because the price reduction reaches the consumer.

It is necessary to keep in mind that there are two ways to reduce taxes, the cheaper electricity bill and the cheaper domestic production. Taxes are often offsetable in production chains. The tax reduction is good for production. However, it is not that important for the residential consumer.

Reducing the costs that are in the tariff, which have a tax nature, because they are part of public policies, is the most important move, and it needs to come next.

Take the cost of the electricity bill and put it where?

In Budget. As it stands, in essence, the energy bill has been transformed almost into a parallel budget for the Union. It incorporates social policies, regional development and incentive policy for sectors and companies, which force consumers to buy more expensive energy than they would need.

Mr. can you give examples of hidden costs?

The electricity bill is a subsidy for coal energy, which has just been renewed. It’s R$ 1 billion a year.

The consumer also subsidizes irrigation and sanitation. It subsidizes the energies that don’t even need a subsidy because today they are the cheapest.

We can call these obligations VIP playpen. Protected areas. In them they serve the best champagne, the special taste, has the softest sofa. Every playpen always starts with a good story, which even seems justifiable, and then they throw the bill for energy consumers to pay.

See subsidy for rural area. Abrace identified that ‘country clubs’, country clubs, benefited from it as if they were rural producers. Imagine the situation. The consumer who is struggling to pay his house’s electric bill pays the country club bill of a much richer guy.

But how was this possible?

The country club was framed as a rural consumer for being in a rural area.

Things like that need to be dismantled. Energy sector choices need to be more transparent.

Another example. They want to retake Angra 3. It was a great loss for Eletrobras and was spun off from the company during privatization. Do we want this energy, if it will cost four times more than renewable sources? Does the consumer want to subsidize nuclear energy?

The consumer will also pay the subsidy for those thermal plants called tortoises, which entered the Eletrobras privatization project. The law ordered constructions away from consumption points, and they will require the construction of gas pipelines to take the gas there, the construction of thermoelectric plants themselves, and transmission lines to bring energy back to consumer centers.

All these choices that have been made, many of them in Congress, add to the cost of energy. The Energy Planning Company itself, EPE, identified that the country would have 30% more expensive energy.

There are movements in Congress trying to review these thermals. Mr. do you think it’s possible to reverse?

Once you grant a privilege, a subsidy, an incentive — and the electricity sector has a history of that — it’s almost impossible to get rid of them.

Encouraged energy is another example. There was a deadline for you to present a project in this area. Until the last day when it was allowed to join, a gigantic number of projects were presented, which will generate more than all the energy capacity that Brazil has today, simply to try to make the most of the subsidy. And there are already movements to try to postpone this adhesion period.

Mr. Are you talking about subsidies for renewable energies like solar and wind?

Yes, from that subsidy that is no longer necessary.

Why is it no longer needed?

Back then, it was necessary to help wind and solar energy because they were very expensive. They would never be able to compete with the big hydroelectric and thermal plants. Thus, it was necessary to help them so that they could have space in Brazil.

The technologies for producing these two energies have advanced a lot, and they, which were the most expensive, have become the cheapest. They are viable now. However, they continue to receive subsidies.

It is as if a humble Brazilian had grown up in life, got a good job, started to have a large income, a house, a car and traveling abroad, but still continued to receive a family allowance, for example.

Resuming the discussion of thermal tortoises, as Mr. said. The discussion went back to Congress to try to include in a bill a way to pay for the brasduto, the fund that will pay for the creation of the gas pipeline network. Will this advance?

We’ve talked to a lot of people about it and the perception is that, at this point, it won’t go forward. Congressman Fernando Coelho Filho (PE), rapporteur of the project in which this could enter, is building a text, with consensus of the sector, without including it. So far, no proposal or amendment regarding what is called a brasduct, that is, making consumers pay for the construction of ducts, has been contemplated.

Mr. You’re talking about project 414, right? Could you give details to explain why it is called an electric sector modernization project?

For us, who operate in the sector, it brings the prospect of correction of the price signal. The mother and father of all the industry’s problems is pricing. The price is set by a computer program, and in a way that program has gone off the rails.

It was made to represent the market when large hydroelectric plants dominated, and it is no longer able to represent the sector today, with other sources. The price is wrong. When it is necessary to turn on the thermal plants, for example, the consumer pays their expenses on the outside.

So, the project creates the instruments so that the price is, in the future, formed in the market, based on supply and demand, as is already the case in other countries. This thing, which is very technical, is going to cause a big change.

Once this and other distortions are corrected, the project leads to market opening.

Market opening in what sense?

Everyone will be able to buy and sell energy, as long as they assume the risk.

It will be like the stock market. Anyone can enter the Stock Exchange. You’ll be happy when the stock goes up. If the share price falls, he knows that no one will pay for that loss.

Today the losses are shared.

For us to go into detail and the reader understand. Will someone who lives in São Paulo be able to buy energy from the distributor in Rio Grande do Norte, for example?

It’s more sophisticated than that. The project separates two important things. On the one hand, the wire, the pole, the transformer, that is, the energy path to people’s homes. On the other hand, there is the energy itself.

Through the wires of the distributors, it will be possible to buy the energy produced anywhere in the country, knowing that you are paying for both.

I will redefine the question. Will a consumer in São Paulo then be able to buy wind energy from Rio Grande do Norte, paying for energy and the use of all the wires that connect the wind farm to the person’s house?

Yup. And you can also buy biogas from the interior of Minas Gerais or solar energy from Piauí. That choice will be possible. But for that to happen, every market needs to be reorganized — and the project takes care of these details to make that possible. In other words, it advances in the structural change that we defend so that the electricity bill is cheaper.

X-RAY

Paulo Pedrosa, 60

Mechanical engineer from UnB (University of Brasília), he has been working in the energy sector for 36 years, having held public positions and in the business and academic areas. President of Abrace (Brazilian Association of Large Industrial Energy Consumers and Free Consumers), he worked at Eletronorte and Chesf, subsidiaries of Eletrobras. He was general director of Aneel (National Electric Energy Agency), from 2001 to 2005, executive secretary of the MME (Ministry of Mines and Energy), from 2016 to 2018, and interim minister. He participated in the boards of the ONS (National System Operator), Itaipu Binacional and the Light and Cemar distributors.