Distributors fight for R$ 60 billion that would relieve electricity bills

The agency that regulates the electricity sector, Aneel, discusses the destination of more than R$ 60 billion in tax credits that can be used to alleviate Brazilians’ electricity bills. The process that deals with the subject, however, practically stopped a year ago, at the stage of public hearings.

The biggest impasse is to define the share of energy distributors in this gigantic amount.

The distributors claim that they sustained the legal battle that guaranteed these tax credits. Of the 53 distributors in operation, 49 went to court. Thus, they understand that they are entitled to the credits. As the agency has already vetoed this alternative, they ask for a good compensation for questioning a taxation considered inappropriate, and an additional one to cover procedural costs.

The entity that represents the companies, Abradee, does not set an amount, on the grounds that there are different criteria under discussion. However, suggestions presented to the agency and market estimates indicate that the value of these two items would fluctuate, below, around R$ 20 billion, that is, at least one third of the total.

Three examples illustrate how many billions are at stake in the business world. In amounts adjusted to July 2021, the most recent update, consumers of the distributor Enel, which serves São Paulo, paid more in taxes, which they now have to receive, R$7.5 billion. Light consumers, from Rio de Janeiro, R$ 6.4 billion. Those from Minas Gerais Cemig, R$ 6.2 billion.

AGENCY WANTS CHEAPER RATE

The issue under debate at Aneel is that recognizing tax credits for distributors means losing the opportunity to use them to reduce the electricity bill — and the effect of accounting for these credits makes a lot of difference.

With a pandemic, a drop in income and a high in the electricity bill, the agency created an alternative to use credits to reduce tariffs even before making a final decision. An order allowed that, in the event of a significant increase in the tariff, it is possible to use up to 20% of the credits provided.

They return to the distributor, which made the collection, and are gathered to reduce the tariff on the date on which that distributor’s readjustment takes place. Plots have already been used in 2020 and 2021, and another batch will be released this year.

Monitoring carried out by TR Soluções, a company that collects and analyzes data from the energy sector, manages to show the practical result. The tariff, on average, rose 8.04% last year. Without accounting for tax credits, the increase would have been 12.19%, a difference of 4.15 percentage points.

Gabriel Lemos, the company’s regulatory analyst, explains that it is not possible to project the general effect this year, but that it tends to be greater due to conjunctural issues. In 2022, the electricity bill will include part of the extra cost created by the use of thermal plants during the drought last year and will weigh on the family budget.

The effect of tax credits on the Light tariff, in Rio de Janeiro, whose annual readjustment takes place in March, is an example of this year’s trend. It was possible to use just over R$ 1 billion in tax credits. The residential energy tariff rose 15.53%. Without the use of credits, the increase would have been 21.4%.

Enel has already used R$ 1.1 billion of the credits to reduce the electricity bill, and Light, R$ 1.4 billion.

According to the company from Rio de Janeiro, the economy in the tariff with the use of credits was around 12%. The estimate is that, in the coming years, another R$ 2 billion will be transferred.

Cemig used about R$ 2.3 billion, which, according to the company, allowed the residential tariff not to be readjusted in 2020 and 2021, with regard to the portion of energy distribution.

The use of credits at Cemig even mobilized Senator Rodrigo Pacheco (PSD-MG). In May 2020, when he was not yet president of the Senate, he participated in the Aneel meeting dedicated to discussing Cemig’s tariff readjustment.

He asked that the credits be used to avoid the 4% readjustment in the electricity bill that was already foreseen that year and reinforced the position that they belonged to consumers.

“The more than R$ 6 billion in credits do not belong to Cemig, they belong to Minas Gerais consumers, and it is essential that they are carried out, I repeat, not in favor of Cemig, but in favor of consumers”, said Pacheco. The agency accepted the suggestion.

CREDITS WERE DEFINED IN THE THESIS OF THE CENTURY

The credits that fuel this discussion are the legacy of another intense debate. They were defined from a tax controversy that lasted 20 years and came to be called the thesis of the century. This is the collection of ICMS on the basis of calculation of PIS and Cofins.

The debate only ended after judgment in the STF (Supreme Federal Court). In 2017, the court found the charge to be improper, with the final details of the sentence being presented in 2021. There is no doubt. The government must reimburse taxpayers.

In the case of energy, the tax collection always fell on the electricity bill and was paid by the consumer. Thus, Aneel took over, in March 2020, the discussion on reimbursement. A public consultation was opened at the beginning of 2021. Industry agents sent their manifestations until the end of March last year. That’s when the clash with the distributors grew.

In the demonstrations, they even defended the right to keep most of the credits. They presented alternative rules to define the validity period of tax credits for consumers.

By the usual rule, when a tax issue of this type is settled in the STF, whoever already had a lawsuit guarantees the right to receive all the amounts paid in excess, from the five years prior to the date of the beginning of the judicial process until the winning in court, the final appeal.

The distributors did not go to court at the same time. Light’s process, for example, began in the 1990s. Cemig’s process, in 2003. Each one has a date, but that deadline applies to all of them.

It so happens that, in the understanding of the distributors’ lawyers, this rule is not applicable to consumers. They claim that they were inert, and that the majority did not claim the overcharge. It was the distributors who fought in court, won the case and own the credits with the Federal Revenue.

Thus, they claim, it is necessary to establish a period within which the consumer would be entitled to claim and receive the credits. Some recommend following the Consumer Defense Code, others the Civil Code. There are suggestions for prescribing in three, five or ten years. The starting point for counting the deadline also varies. Some argue that it would be 2021, the year that marks the end of the trial in the STF. Others say that it would be the moment when the company won the case in court.

In a note sent to Sheetfor example, Light stated that it “considers the longest possible statute of limitations, allowing the transfer to consumers retroactive to ten years before the decision of the STF, without the need for individual actions”.

“Companies are not opposed to the transfer of credits, but we need to discuss whether there was a statute of limitations for the consumer to complain, and what would that period be, because the return of credits will not be full”, says the president director of ABCE ( Brazilian Association of Electric Power Companies), which brings together distribution, transmission and generation companies.

In summary, there are different arguments that seek the same end: guaranteeing credits to distributors.

Tax experts interviewed by the report, who preferred not to have their names mentioned, explain that, as is customary in tax matters, most distributors have even recorded the total gain with tax credits in their balance sheet when they won the lawsuits in court, which increased its revenues, and profit, at the time.

Each time the credits are used in the electricity bill, the opposite occurs: it is necessary to consider the amount as an expense, which reduces the financial result. There is, then, an accounting chessboard for the use of these credits within each company.

Among the distributors, there is even a certain dissatisfaction with the fact that Aneel has taken over the debate.

“The agency’s position in this discussion is not adequate”, says Madureira, from Abradee. “This issue is not regulatory, the scope of an agency.”

Aneel’s manifestations were opposing the distributors’ allegations. The agency’s attorney, for example, in an opinion given in March this year, understood that the credits belong entirely to consumers.

It is the same reading of the Idec (Brazilian Institute for Consumer Protection), which follows the debate.

“The consumer paid the extra amount, so it is he who should receive it, and Aneel, as a regulator, of course, analyzes the relevance of each demand”, says Anton Schwyter, coordinator of the Energy and Sustainability Program at Idec.

Lawyer Lorenço Moretto, from Idec’s legal department, reinforces the opinion of Aneel’s attorney.

“Providing the public service of supplying energy is an activity of the State, transferred to a concessionaire, which is committed to offering the best service at the lowest price, so one of its duties is to promote reasonable tariffs”, he says.

“An energy concessionaire cannot behave like a Casas Bahia or a Pão de Açúcar, which are private companies.”

Abradee’s president, Marcos Madureira, says that this assessment is wrong. “The distributor has no obligation to go to court, what they did was their own initiative that needs to be fully recognized.”

Madureira says that if the agency does not recognize the distributors’ right to credits, the discussion will go to court.

Abradee, in parallel, also wants to take advantage of the passage of bill 1,143 in Congress to establish a deadline for reimbursement of tax credits in this type of discussion.

The rapporteur of the matter, deputy Arnaldo Jardim (Citizenship-SP), has already become aware of the controversy. He says that, with the return of face-to-face work in the Chamber, he will establish a broad debate around sensitive issues. “There’s a lot of money and a lot of interests involved, and we need to hear from all sides.”

In the opinion of lawyer André Edelstein, an energy specialist who does not work with any of those involved in the discussion, the controversy requires a deep analysis, which explains Aneel’s delay in hitting the hammer. “The credit was generated, and it is reasonable to revert to whoever paid the tax, the consumer,” he says.

But Edelstein argues that it is fair to recognize the role of distributors.

“We are discussing what to do with the gains from the lawsuits, but they took a very high risk of succumbing, they could have lost and paid the bill on their own”, he says.

“One of Aneel’s attributions is to provide balance, and it will have to observe all the points.”