Government opens loophole for new extra fees on the electricity bill due to water crisis

The government published this Monday (13) a provisional measure that gives the CMSE (Committee for Monitoring the Electricity Sector) authorization to implement new extra fees on the electricity bill to cover exceptional costs in the event of a new water crisis.

The current extra fee, which charges BRL 14.20 for every 100 kWh (kilowatt-hour) consumed and is called the water scarcity flag, is valid only until April. It was implemented in September to cover the high cost of the thermals connected to save water in the reservoirs.

The possibility of reissuing the extraordinary brand in the future is part of the provisional measure that authorizes a new aid to the electricity sector, published this Monday in an extra edition of the Federal Official Gazette. The loan amount is yet to be defined.

The loan is intended to cover a portion of costs with thermal plants that exceeds the amount collected by the water scarcity banner, as the cost of natural gas generation soared with the rise in international prices amidst energy crises in China and Europe.

The market estimates that between BRL 10 billion and BRL 15 billion will be needed, which will be paid in additional installments on the electricity bill over the next five years, following a loan model of BRL 14.8 billion taken in 2020 to face the effects of the pandemic on the sector.

Even with the water scarcity flag in force since September, the gap in the bill of tariff flags already totaled R$ 12 billion up to October, according to data from Aneel (National Electric Energy Agency).

This Monday’s MP does not define when they would be applied or how much any new extra fees would cost. It only says that the CMSE “is authorized to establish an extraordinary tariff flag to cover exceptional costs arising from a situation of water scarcity”.

The committee is led by the Ministry of Mines and Energy and has representatives from Aneel, ANP (National Oil, Gas and Biofuels Agency), EPE (Energy Research Company), ONS (National Electric System Operator) and CCEE (Electric Energy Trading Chamber).

Its function is to monitor the energy supply conditions in the country and draw up adjustment measures or solutions for any problems.

Defined by Aneel, the regular tariff flags are identified by three colors. Green, practiced in normal situations, has no extra cost; the yellow one adds R$1.87 for every 100 kWh consumed; and the red one charges R$ 9.49 per 100 kWh.

The values ​​were readjusted in 2021, but they were still insufficient to cover the cost of all the thermal plants connected to save water on the reservoirs.

The implementation of the water scarcity flag was defined by the Creg (Chamber of Exceptional Rules for Hydroenergetic Management), an inter-ministerial group created in June to face the crisis. The extraordinary fee is not charged to low-income consumers.

Its adoption had a strong inflationary impact during the year, making energy costs one of the main pressure factors on the IPCA, which has already accumulated a 10.74% increase in 12 months, the highest rate for the period since 2003.

In a statement, Abradee (Brazilian Association of Electric Energy Distributors) said that the aid “is of extreme importance for the electricity sector and society as a whole.”

“With the high costs generated by the extra thermal contracting, added to the high fuel prices, it would be impossible for consumers to bear these costs at once,” said the entity, which represents the electricity distribution segment.