Energy in SP costs 25% less than in Belém; compare the values

Families in Piauí have a monthly per capita income of R$837, one of the lowest in the country. Families from Brasília are at the top of the national ranking of earnings, with around R$2,500. But the piauiense pays an energy tariff 20% more expensive than the resident of the federal capital.

Brasília and Piauí are not isolated cases. The electricity bill in Brazil is like this. Although the country has an interconnected energy system, the final cost for consumers varies widely.

Minas Gerais is home to most of the hydroelectric plants in the Furnas system, one of the pillars of national supply, but its tariff is almost 14% more expensive than Paraná’s, which has negligible generation, in comparison. Energy in Rio de Janeiro, an international tourist hub, is 22% more expensive than in the beaches of Santa Catarina. The same is true of a relationship between the underdeveloped Pará and the thriving São Paulo. The energy tariff is 25% lower in São Paulo.

The differences occur because the formation of prices in the sector includes a range of intertwined components that escape common sense, says Ângela Gomes, a consultant for strategic matters at PSR, an energy company.

The final tariff itself, which appears on the electricity bill, is the sum of two other tariffs, distinct from each other, the Tusd (Distribution System Usage Tariff) and the TE (Energy Tariff). Both, in turn, are composed of elements that also vary.

Rules for subsidy payments and numbers of consumers by area are among the factors that change the final value, differently among the 53 distributors in the country.

The highest tariff for consumers is in Pará, which costs R$ 816 per MWh (megawatt-hour), the lowest is in Amapá, at R$ 506 per MWh. The values ​​appear in the account in KWh (kilowatt-hour), respectively, 0.816 KWh and 0.506 KWh. The difference is 61%. The data are from 2021, for the purpose of comparison with all annual adjustments, but the differences tend to change little this year, explain sector experts.

ICMS was once a weighty element in the variation. But the approval of a cap of 17% to 18% for the state energy tax in June this year reduced the tax differences.

Distributor cannot choose who will buy energy from

The price paid in the purchase of energy is an important element to explain the multiplicity of values. But the location of the companies —far or close to generating plants— makes no difference in this. Under current legislation, distributors do not have the autonomy to choose from whom they will buy.

That’s why companies like Cemig or Energisa Minas Gerais do not pull a wire directly from Furnas, just as Equatorial Piauí cannot just use energy from the state’s solar parks, which are among the largest generators of cheap energy in Brazil.

Distributors can only buy energy at auctions. “And the value of the purchase of energy depends on the auction in which the distributor enters”, explains Ângela.

These auctions are organized by public bodies in the sector, such as MME (Ministry of Mines and Energy) and Aneel (National Electric Energy Agency). Each distributor also has its own timetable for entering an auction. They don’t go together at the same time. And auctions are surprise boxes.

It is not possible to know or choose how much solar and wind power will be available, today the cheapest, or the most expensive thermal plants. A distributor just enters the auction, informing the volume it needs to buy to supply its customers.

Losses and cats also make the electricity bill more expensive

Energy losses also influence the final cost. They can be operational, due to the company’s inefficiency, or due to factors beyond its control, such as theft.

The Rio electricity bill is one of the most affected in Brazil by losses of this type. The clandestine connection, the so-called cat, is the main problem. At Celesc, this loss is much smaller.

The different costs of transporting energy through the system also need to be considered, says Helder Sousa, Director of Regulation at TR Soluções, a company that analyzes the electricity sector. Souza highlights transportation in distribution, which he considers equipment, network and substations expenses, for example.

In this regard, a company like Enel São Paulo, which operates in a region with urban concentrations and many users per kilometer of network, will have better results than an Equatorial Pará company, whose network crosses long distances with demographic gaps.

The rule for payment of subsidies also feeds differences. An example is the distribution of subsidies provided for in the CDE (Energy Development Account).

This year, they total R$ 30 billion. Consumers in the North and Northeast, previously exempt, now pay, but a much smaller portion, R$ 3.4 billion. The largest portion of the bill, R$ 26.4 billion, goes to consumers in the Southeast, South and Midwest. The amount payable by each distributor also varies, and the calculation for the distribution considers each one’s market.

Another item that influences differences in electricity bills is the effect of expenses that distributors cover and are entitled to pass on to consumers when the electricity bill readjusts. This adjustment occurs once a year, on the date of the tariff review defined in the concession agreement. All expenses that occur in the 12 months between the adjustments are covered by the companies.

The CDE payment is an example of the effect on the final value.

Its apportionment takes place in January. The expense is covered by the distributors, with the right to receive the amount of this expense, adjusted by the basic interest rate, the Selic. The company that has a tariff readjustment in March will have a smaller correction than the company that has the readjustment in July, for example. This directly influences the amount transferred to the electricity bill, and the differences between the various accounts.

This logic can be applied to numerous expenses in which there is a mismatch between the payment and the readjustment date.

In the past, the energy tariff already had a single price in Brazil, recalls Marcos Madureira, president of Abradee (Brazilian Association of Electric Energy Distributors), but the methodology proved to be harmful. The result was not good, he says.

“The most efficient distributor paid for the less efficient, and the most efficient consumers were not benefited. There was no incentive for anyone to improve performance”, says Madureira.

In the current regulatory model, companies are compared with each other and encouraged to work to achieve the best performance indicators. Part of the efficiency gains can be incorporated into the result, in addition to reducing the electricity bill of all consumers.