‘Pay 2 works and get 1’ policy compromises Itaipu rate drop

The tariff announced for energy from Itaipu in 2023 is the lowest in history. The debt for the construction of the binational power plant on the Paraná River, between Brazil and Paraguay, will be settled this year, which allows for a significant cut in the final price.

A tariff of US$ 12.67 per kW (R$ 66 per kilowatt) was set on the Brazilian side, which came into effect last Sunday (1st). Compared to the value practiced in 2022, this is a 33% drop in dollars.

Former President Jair Bolsonaro (PL) even posted on a social network, on Tuesday (3), already out of office, that his management had made this reduction in favor of the country.

This tariff, however, is provisional, and its final value is unpredictable. It was not agreed with Paraguay. The early announcement in Brazil even bothers the neighbors, who are in the middle of the election period. They want to deal with the topic only in the second half of 2023.

Paraguayan negotiators are already talking about maintaining the tariff fixed this year, of US$ 20.75 (R$ 108.25), according to people interviewed by the Sheet. The difference is fueled by disagreements regarding how much will be set aside by Itaipu to fund its socio-environmental programs —mostly works.

When looking at the tariff, the variation in value is a few dollars, but in Itaipu’s budget what will be under discussion will be a difference of almost US$ 1.2 billion (R$ 6.2 billion).

“We welcome the reduction announced by Brazil, but it could be a big fake”, says Luiz Eduardo Barata, president of the National Front of Energy Consumers. “The values ​​under discussion with the neighboring country are so high that it is no longer possible to talk about compensation for the war in Paraguay.”

According to a survey carried out by the PSR consultancy, one of the most respected in Brazil, the expenses with the so-called socio-environmental responsibility programs of Itaipu increased from US$ 88.5 million (R$ 461.7 million) in 2013 to US$ 316.1 million (R$ 1.65 billion) this year, an expansion of 257%.

“If such an increase had not occurred, certainly, the burden on the bill of the Brazilian captive consumer [residências e pequenos negócios] would have been lower”, highlights the report.

At the end of the year, the plant’s own administration disclosed 26 projects financed by the energy tariff in the Bolsonarist administration from 2019 to 2022. -487 in Paraná, which were honored with visits by Bolsonaro last year.

The PSR report states that “the resources allocated to works constitute a powerful political asset, although incompatible with the scope for which the payment of the Itaipu tariff is intended”. The consultancy points out that university scholarships, bridges, schools and roads in Paraguay were also financed with energy tariffs.

WORKS PAID BY ITAIPU PRESS ELECTRICITY BILL IN BRAZIL

Specialists in the energy sector on this side of the border, however, warn that the responsibility for these projects falls on Brazil.

According to the original agreement, Itaipu was not made to make a profit. Its energy tariff is equivalent to the sum of the debt payment and the expenses to maintain the plant, grouped in the so-called Cuse (Electricity Service Costs).

Roughly speaking, Cuse accommodates three groups of expenses: the payment of royalties for the use of water, expenses with the maintenance of the plant, and with the exploitation of water resources.

In 2005, the exploration cost began to include disbursements with a new mission for Itaipu, to promote social, economic and environmental development in its area of ​​influence. On the side of Brazil, this area is the state of Paraná. On the other side of the border, the entire territory of Paraguay.

The PT president, Gleisi Hoffmann (PT-PR), who was financial director of Itaipu, had a direct participation in the definition and implementation of this new socioeconomic role, at the time with initiatives more focused on social services.

As it is a binational power plant, everything at Itaipu is shared between the two countries, including resources from socio-environmental projects. For every US$ 1 spent on a work in Brazil, another US$ 1 must be sent to Paraguay for a similar destination.

However, although each side of the border is also entitled to 50% of the energy generated by the hydroelectric plant, historically, around 90% of Itaipu’s revenue came from the sale of energy in Brazil. Today, that percentage is around 86%. This is because Paraguay does not consume everything it is entitled to and sells the remaining portion to Brazil.

According to a survey by PSR, Brazil pays, only with the purchase surplus from the neighboring country, an equivalent to 17.5% of the budget of the Ministry of Public Works of Paraguay.

On this side of the border, by law, distributors in the states of the South, Southeast and Midwest are obliged to buy energy quotas from Itaipu. This cost is on the electricity bill.

Because of these details, little known by most Brazilians, experts say that energy consumers in ten states in Brazil, in practice, pay their electricity bill for two works, but take one — remembering that on this side of the border only Paraná is favored.

“We see these costs with great fear. There should not be the possibility of these transfers”, says Ângela Gomes, PSR consultant.

“First, because there is no incentive in the regulation for the plant to have lower costs, including to be more efficient in the financial management of these works. But the worst thing is that these costs are passed on to final consumers, which works as a regressive tax , which weighs much more for those with lower incomes.”

In other words, this means that residents of poor areas, such as the community of Heliópolis, in São Paulo, and Belford Roxo, in Rio, many of them without money to pay for a qualification course, pay for scholarships on their electricity bills granted by the government of Paraguay to its vulnerable citizens.

According to Gomes, Brazil has the chance to put an end to this distortion in the revision of Annex C of the treaty, this year. Ever since the plant began operating in the 1980s, there has been an expectation that the tariff would be reduced in exact proportion to what was written off the debt. With discharge, the parties could also renegotiate the entire Annex C of the binational treaty, which deals with financial guidelines

GLEISI HOFFMANN AND JANJA WILL PLAY ROLE IN THE NEGOTIATION

Itaipu’s debt began to fall last year. It went from US$ 2 billion (R$ 10.4 billion) to US$ 1.4 billion (R$ 7.3 billion). This year it will be US$ 277 million (R$ 1.4 billion). It was supposed to be the moment of return for Brazilian consumers, but that was when the disagreements with the price of energy began.

The MME announced at the end of 2021, and Aneel also ratified it, that the debt drop would lead to a tariff of US$ 18.97 (R$ 98.96). Negotiators from Paraguay, however, wanted to maintain the value that had been frozen since 2009, of US$ 22.60 (R$ 117.9). The discussions dragged on until August, when the tariff of US$ 20.75 was announced.

In practice, this increased exploration expenses to an unprecedented amount of US$ 1.054 billion (R$ 5.5 billion). In the previous ten years, on average, this cost was US$ 763 million (R$ 3.98 billion).

So that Brazilian consumers would not be impacted, the difference in relation to the provisional tariff was subsidized by the Itaipu energy commercialization bill.

The provisional tariff for 2023 was ratified at the end of December at an Aneel meeting, in a technical presentation, in favor of the value, made by director Fernando Luiz Mosna. Aneel’s board knows that the negotiation will be fierce, but the agency understands that its mission is to defend the most competitive tariff possible.

“We are going to have a reduction in Itaipu’s tariff, due to the end of debt amortization, on average, of 3% in the South, Southeast and Midwest regions”, says Sandoval Feitosa, director general of Aneel. “And the negotiation of the Itaipu treaty is a great opportunity for a structural tariff reduction.”

The provisional value was presented by the MME (Ministry of Mines and Energy) on December 19, two weeks before the elected government took office, as “a blessed legacy” of the Bolsonarist administration. However, the Sheet found that there were differences in the definition of value.

Simulations show that with a residual debt and the exploration cost at US$796 million, the tariff could drop to US$10.77 (R$56). The then Minister of the MME Adolfo Sachsida defended this value. The perception is that lowering the ruler as much as possible at the start would improve the conditions for negotiating with Paraguay.

With the tariff at this level, the value of energy from Itaipu would also be equivalent to the spot market price in Brazil, R$ 55, making it competitive in the free market. However, the minister was convinced to keep a higher value, precisely so as not to squeeze the exploration expense.

Maintaining the current tariff value, as Paraguay signals, would put the cost of exploration above US$ 2 billion. At Itaipu, there is the prospect of an initial dialogue worth around US$ 1.6 billion, almost twice the amount sought by Brazil.

It will be up to the government of Luiz Inácio Lula da Silva (PT) to define whether Brazil wants more works or a smaller electricity bill and renegotiate Annex C.

Sector specialists claim that it is difficult to predict how the issue will advance in Lula 3, with the new administrations in the MME, in the Ministry of Foreign Affairs and in the direction of Itaipu, interlocutors in this negotiation.

Former Paraná governor Roberto Requião was quoted for the council, but has already ruled out the possibility. To the Mônica Bergamo column, he stated that the offer was disrespectful.

People close to Itaipu believe in the return of Jorge Samek, who once commanded the company and has good relations with the Paraguayans. But there is a betting pool for the nomination of former minister Paulo Bernardo. Also gaining strength is the name of Deputy Enio Verri (PT-PR).

Gleisi Hoffmann is expected to participate in all discussions about Itaipu. Questions about the plant also tend to attract the attention of first lady Rosângela da Silva, Janja, who worked for almost 20 years at Itaipu. In addition to acting as an assistant to the general director, she coordinated programs aimed precisely at sustainable development.

The report made contact with the advice of Itaipu, the president of the PT and the first lady, but had no response until the publication of this text.