Electricity bill could rise by more than 10% in 2024 with subsidies

Even with hydroelectric reservoirs fuller than usual, the electricity bill could be somewhat more expensive in 2024. Reason: the granting of a series of subsidies.

The Brazilian Association of Large Energy Consumers and Free Consumers (Abrace) estimates that the tariff increase could reach 10.41%, depending on energy distributors and the use of PIS/Cofins credit to contain this increase.

The price adjustment could be the highest since 2021. That year, the price of electricity varied, on average, 21.22%, according to the Brazilian Institute of Geography and Statistics (IBGE). The following year, there was an abrupt drop of 19.01%, motivated by tax relief granted by the government of former president Jair Bolsonaro (PL). In 2023, until October, the electricity bill accumulates an increase of 7.78%, on average.

If confirmed, an adjustment of more than 10% in the average tariff will correspond to more than double the expected inflation for 2024. The midpoint (median) of expectations from banks, brokers and consultancies for next year’s IPCA is at 3, 92%.

The rise in prices also coincides with a time when reservoirs have a large amount of water, which makes it unnecessary to activate many thermoelectric plants, which generate much more expensive energy.

In other words: the average cost of energy generated in the country is lower than in drought years, which should result in greater peace of mind for the consumer.

Data from the National Electric System Operator (ONS) show that the reservoirs in the Southeast/Central-West subsystem, the main responsible for supplying hydroelectric energy to Brazil, were at 63.9% of maximum capacity on Sunday (3).

This is the highest level for the months of December in the last 14 years. The index provides reassurance because the so-called “dry period” of the electricity sector – from May to October – has already ended.

In the South subsystem, the so-called “stored energy” reaches 97.7% of the total. In the Iguaçu River basin, for example, the hydroelectric plant lakes occupied more than 99% of capacity.

Warren Investimentos is a little more optimistic regarding the adjustment in the electricity bill. The institution projects a 4.7% increase in energy next year. It takes into account the use of PIS/Cofins credits by distributors to smooth the increase. However, there are states in which they have already been fully used. According to the newspaper “O Globo”, one of them is Minas Gerais, where the increase could reach 15%.

Regulatory framework for offshore wind farms included subsidies for other generators

A series of subsidies come with the “jabutis” placed in the regulatory framework for offshore electrical energy, that is, on the high seas, approved last week in the Chamber. The proposal still needs to pass the Senate. The government, for now, indicates that it will veto “smuggling” if they are definitively approved by Congress.

Privileges for certain generators may end up falling into the consumer’s account. The cost is estimated at up to R$40 billion per year.

The “jabutis” included by the rapporteur, deputy Zé Vitor (PL-MG), have nothing to do with renewable energy. One of them extends until 2050 the contracting of coal-fired thermal plants whose contracts end in 2028.

Another makes it more expensive to contract energy from natural gas thermoelectric plants linked to the privatization of Eletrobras. When authorizing the sale, in 2022, Congress incorporated into law the government’s obligation to contract thermal plants in places without a fuel supply.