Electricity bill: Itaipu sets tariff for 2023 – 04/17/2023 – Market

Negotiations between Brazil and Paraguay defined Itaipu’s energy tariff for 2023 at US$ 16.71/Kw (R$ 82.57 per kilowatt). The value was approved by the board of directors of the binational plant this Monday (17), as anticipated by the Sheet.

The Itaipu tariff for charging in Brazil had been unilaterally fixed, at the end of the Jair Bolsonaro (PL) government, at US$ 12.67 (R$ 62.65). Paraguay worked to maintain the value of US$ 20.75 (R$ 102.60), which had been committed by both sides in 2022. In an interview with Folha, the new general director of Itaipu, Enio Verri, had already signaled that it would be difficult to maintain the provisional value.

Verri considered Bolsonarist management’s decision to adopt a low tariff without consulting Paraguay as reckless, as the value was applied by some distributors and generated an account that will have to be covered by Itaipu to prevent the consumer from paying the difference, with impacts on the inflation.

The tariff of around US$ 16 represents an increase of almost 32% in relation to the provisional value, which was in force since January 1st of this year, but means a drop of 19.5% in relation to the tariff defined last year.

For decades, there had been great expectations regarding the Itaipu tariff in 2023. It was known that this year the debt for the construction of the plant would be settled, making room for a reduction in the price of energy. The end of the debt was celebrated at the end of February in a ceremony at the company’s headquarters.

A study by the previous management pointed out that, with the end of the debt, the rate of the binational plant could drop to US$ 10 (R$ 49.45). In an interview with SheetVerri stated that the value of US$ 12 accompanies the debt reduction.

Itaipu’s tariff today costs more than energy in the so-called spot market, which serves as a national parameter for the price of this input. At this moment, when the reservoirs of the hydroelectric plants are full after the heavy rains in the summer, energy is quoted at R$ 55 in Brazil.

The value resulting from the negotiation will generate an extra, which can be shared by both countries to finance public projects.

The treaty that governs the plant establishes that Itaipu cannot make a profit, that is, have money left over. The tariff is equivalent to the expenses to maintain the plant, technically called Cuse (Electricity Service Costs). They are the sum of three large groups.

The heaviest cost has always been the debt contracted for the construction of the plant, which had been representing just over 60% of the total. Without it, the payment of royalties for the use of water and also the cost of exploiting energy remain.

In practice, this cost should include only the plant’s operation and maintenance expenses, but since 2003 it has included disbursements to fulfill the plant’s so-called socio-environmental mission. Over the years, the projects of this mission were concentrated in works.

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$ 437.6 million) in 2013 to US$ 316.1 million (R$ 1.563 billion) this year.

At the end of 2022, the plant’s 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.

Verri’s new management intends to review this. It will maintain the works already started, but it has already been disclosed that, within the scope proposed by the government of Luiz Inácio Lula da Silva (PT), Itaipu on the Brazilian side intends to invest in projects aimed at education, preservation of the environment and innovation.

People close to the company, who prefer not to have their names revealed, claim that the argument of the socio-environmental mission has transformed the negotiation of the Itaipu tariff into a much more political discussion than a technical one, with losses for consumers who pay for the projects, but cannot take advantage of its benefits.

Socio-environmental projects can be developed throughout the territory of Paraguay and, in Brazil, in Paraná. However, energy from Itaipu is obligatorily paid for mainly by consumers in the South, Southeast and Midwest regions.

This is because, despite the fact that the energy produced by Itaipu is divided half and half between the two countries, Paraguay does not consume all of its share and, in the end, what is left is sold to Brazil. Brazilians in the South, Southeast and Midwest regions consume 85% of the energy distributed by the binational plant, with impacts on the electricity bill in these regions.

The $16 tariff was met with concern by energy experts. This segment argues that the right thing would be to use the extra cash generation obtained with the end of the debt to reduce the tariff value, contributing to a drop in the electricity bill of homes and in the cost of operation of companies.

This was the second time that Brazil tried, but failed, to set a lower tariff.

The Itaipu tariff must be negotiated annually. However, it was frozen from 2009 to 2021. Brazil did not want the freeze for 2022. It would be an election year, and Bolsonaro had the goal of reducing the energy tariff. The electricity bill was already weighing on Brazilians’ pockets, at a time of falling income, and was raising inflation.

Also unilaterally, the Brazilian government fixed the tariff at US$ 18.97 (R$ 93.74) for that year. This was the price practiced until August, when negotiations closed at a rate of US$ 20.75. This negotiation raised the cost of exploring energy at Itaipu to an unprecedented value of US$ 1 billion (US$ 4.9 billion), freeing up millions of dollars for socio-environmental projects on both sides of the border.

Effectively, however, to avoid the impact on Brazilians’ electricity bills, the rate of around US$ 18 prevailed. The difference was covered by a reserve account. A similar alternative will have to be adopted now to compensate distributors who have used the provisional value of US$ 12.