Electricity bills rise above inflation and weigh heavily on consumers’ pockets; understand where the increase comes from

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Energy costs, subsidies and investment in networks have contributed to the rise. Government discusses ways to reduce the bill. The electricity bill is expected to increase above inflation this year, something that has been happening for residential consumers since at least 2021, according to data from the National Electric Energy Agency (Aneel). For 2024, Aneel’s projection is for an increase in the electricity bill of 5.6%, above the inflation estimated at 3.9% by the financial market. PSR consultancy, in turn, projects an increase of 4% above inflation. According to experts consulted by g1, the electricity bill has been pressured by three main factors: growth in subsidies paid by consumers; cost of contracting energy; investments in transmission. “Subsidies and charges are a block. The second portion, which has grown a lot, is energy, and the third portion that is growing, but will grow more, is networks”, explains the former president of the Energy Research Company and executive director of PSR, Luiz Barroso. Residential installations boost solar energy sector in Brazil This report will explain: What is behind the increases? Why do some states have higher increases? What is the government’s proposal? (This is g1’s third report on public policies in the energy sector. The series also explained the excess supply of energy in Brazil, which causes waste, and the cost of subsidies on the electricity bill) What’s behind the increases ? ➡️ Subsidies According to the National Electric Energy Agency (Aneel), subsidies are one of the items that “have been weighing heavily on consumer bills”. In 2024 alone, consumers will pay R$32.7 billion in charges on energy tariffs, which represents 12.5% ​​of Brazilians’ electricity bills (see art). Subsidies are charges paid by consumers in energy tariffs to fund public policies in the sector, such as incentives for certain energy sources and discounts on electricity bills for low-income people. ➡️ Cost of contracting energy In addition to the subsidies — which are paid by all consumers — there is the cost of contracting energy. This cost is different between captive consumers – who can only buy from the local distributor – and free consumers. Today, only companies can be free consumers. This means that they can negotiate their energy contracts directly with suppliers and plants. “The captive consumer is paying for some system services that only he pays for, for example, thermal generation. Today, you don’t have thermoelectric plants contracted on the free market”, says Barroso. Thermoelectric plants are important for generating energy in times of reduced supply of renewable sources, but they are also more expensive. At the end of 2023, for example, the government needed to activate these plants because of the increase in consumption due to heat waves. Barroso argues that the cost of system security — the role of thermoelectric plants, for example — should be paid by all consumers, captive and free. ➡️ Cost of networks In addition, there is the cost of networks, divided between transmission and distribution. Basically, transmission lines connect plants to distribution networks, responsible for bringing energy to people’s homes and businesses. There are some exceptions to this convention: large consumers, such as industries, can connect directly to the transmission network, for example, without needing a distributor. Some energy generation equipment, in turn, connects directly to the distributor’s network — solar panels on the roofs of houses are the most common example of this. The billion-dollar investments in transmission, contracted by the government at auctions, become a tariff for the consumer. These new lines are being built to transport renewable energy produced in the north of Minas Gerais and in the Northeast states. The cost of transmission has increased for consumers due to the increase in the contracting of these networks. As there are many renewable energy plants in the Northeast and north of Minas Gerais, the government has contracted the construction of new transmission lines to meet this increase in generation. “Today, the cost of transmission in Brazil is close to R$40 billion per year. It is the cost that consumers pay every year and the trend is increasing”, said the director of Electric Energy at the Association of Large Energy Consumers (Abrace), Victor iOcca. According to iOcca, projections are that this cost will increase to R$50 billion per year in 2028. “What we are realizing is that soon the transmission cost will be more relevant than the pure distribution cost for consumers”, he stated. The deputy superintendent of Transmission at EPE, Marcos Vinicius Farinha, states that transmission should be seen as an investment in the flow of cheaper energy. “We cannot look at transmission just based on its cost. It has an associated value which is precisely to bring this generation, or connect this generation, cheaper, and in the end this expansion minimizes the cost for the consumer”, he declares. There is also the cost of investments in distribution networks, which are remunerated by the tariffs defined by Aneel. The agency makes annual adjustments to distributors’ tariffs, with reviews every four or five years. Electricity bills grow above inflation. Editoria de Arte/g1 Why do some states have higher increases? According to Aneel, the adjustments are applied “according to regional specificities that are variable for each company”. The agency considers the following items when calculating the adjustment of distributors’ tariffs: cost of purchasing energy by distributors (distributors buy from plants); use of transmission and distribution facilities; sectoral charges – such as the Energy Development Account (CDE), which pays for subsidies, but also charges that cover system security and energy reserves, for example; cost of default; energy losses in the distribution network, due to theft or technical losses; correction of tariffs for inflation; productivity, quality and transition of distributors’ operating costs. “[O reajuste] It differs a lot from distributor to distributor. There are distributors where, on average, you should not have any type of adjustment, close to zero, including some deflation. In others, the impact must be up to double digits”, says iOcca. According to Abrace’s projection, the adjustments could range from a reduction of 4.39% for Amazonas Energia consumers to an increase of 19.07% for Equatorial Goiás this year, for example. The director of Abrace explains that the reduction in adjustments — which in some cases will be reflected in tariff cuts for consumers — is related to the transfer of excess taxes collected. In 2022, Congress approved a law that forced distributors to pass on, in tariffs, tax credits arising from the removal of ICMS from the calculation base of federal PIS/Cofins taxes. Some distributors, such as Cemig, have already transferred these values, so they do not have discounts on adjustments. Furthermore, issues such as the high rate of energy theft and investments by distributors in the networks also influence the increase in tariffs. In 2023, the expected increase in tariffs for distributors in the North region, especially in Amapá, Acre and Rondônia, drew attention. In Amapá, the increase would be 44% — not yet implemented. “What is causing the increase in these distributors in the North are basically investments in distribution networks that started to happen after they were privatized and these investments, important to guarantee the reliability of supplies, are paid in the tariff, there is no way around it”, explains Barroso . What is the government’s proposal? Because of the situation in Amapá, the government is studying a way to reduce the electricity bill, which can be implemented by means of a provisional measure (MP) — which comes into force immediately, with the force of law, but then needs to be approved by Congress. In December, the Minister of Mines and Energy, Alexandre Silveira, announced the measure, at an event in Amapá with the participation of President Luiz Inácio Lula da Silva (PT). However, the proposal is still under discussion in the Executive. The idea is to use Eletrobras’ contributions (deposits), provided for in the law that allowed its privatization, to pay the loans made by the distributors due to the Covid-19 pandemic — which increased defaults in the sector — and the water shortage account — due to cause of costs during the 2021 water crisis. On February 21, Silveira stated that he can use R$26 billion remaining from Eletrobras to make the tariff reduction possible. This deposit is provided for in the company’s privatization law, with a payment schedule over the next 25 years. “I had the idea of ​​allowing this payment in the provisional measure, if people are not aware of it and moving forward. […] The possibility of us advancing, that is, securitizing these R$26 billion to minimize the impact on the tariff”, said Silveira. The minister talks about three provisional measures, which are being prepared by the department. At least one of them should address the issue tariff. To g1, government interlocutors stated that the measures will still be forwarded for analysis by the Civil House. This is expected to happen by next week. The president of the National Energy Consumers Front, Luiz Barata, defends a review of the framework sector, justified by all the changes that have occurred since the publication of the rules that govern the energy segment. “It is not one, two, three, four, five provisional measures that will solve the problem, it is a new sector design [que vai resolver].”

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