Lula signs measure to lower electricity bills; effect may be opposite

President Luiz Inácio Lula da Silva (PT) and the Minister of Mines and Energy, Alexandre Silveira, signed this Tuesday (9) the provisional measure to reduce consumers’ electricity bills this year. The expectation is to reduce between 3.5% and 5% in annual adjustments until 2026. Industry experts, however, assess that in the medium and long term the decision, considered political and unpredictable, could have the opposite effect and bring increases to the account of Brazilians.

This reading is mainly due to two points in the MP. One of them is that the value of the privatization of Eletrobras, estimated at R$26 billion, will be brought forward to pay the Covid Account and Scarcity Account. The money will be used to pay off interest and debts incurred in the last four years, during the pandemic and water shortages, which impacted the population’s electricity bills.

According to the Ministry of Mines and Energy, the measures aim to combat, in a structural way, tariff distortions created in previous years.

“We are bringing, structurally, a relief of at least 3.5% on the energy bills of Brazilian families, paying off the irresponsible loans of the previous government and paying off the Water Scarcity bill and the Covid bill”, highlighted the minister.

Victor iOcca, director of Electric Energy at the Brazilian Association of Large Industrial Energy Consumers and Free Consumers (Abrace), explains that the problem is that anticipating payment from Eletrobras is receiving income that the consumer has the right to earn over the years in interest and fees at once, without knowing what it will look like in the future.

“The current measure is incomplete. It paves the way for anticipating revenue for the consumer in the future. In other words, it is taking away relief that would be diluted over the years”, says the executive.

“Anticipating revenue for short-term relief is a political decision. But, since they made the MP, they could take advantage and carry out a major reform of the electricity sector and avoid a major rebound effect”, stated iOcca.

Rafael Herzberg, managing partner of energy consultancy Interact, also believes that the solution is a one-off solution with a high risk of side effects soon. For him, the government needs to be assertive to resolve the problem in the electricity sector.

“We have already had experience with these momentary maneuvers, but we have to attack the central problems, such as the cat (energy theft) and subsidies. Around 15% of the energy generated in the country is lost in cats. And subsidies are important at an initial stage, but then it doesn’t make sense for everyone to pay for some to have it.”

Herzberg adds that the “institutionalized mess” in decisions deters investment. “Investors notice these maneuvers and the investments that would be so necessary do not come, because it is unpredictable to bet on Brazil”.

Clean energy projects with more time to start operating and subsidies

One of the objectives of the MP, according to the Ministry of Mines and Energy, is to adapt the deadlines for concrete projects related to the generation of clean and renewable energy to the implementation schedule of the transmission lines auctioned by this government for flow to the load center.

According to Silveira, the provisional measure enables R$165 billion in private investments and around 400,000 jobs. Among the states that have been consolidating these contributions, he mentioned Alagoas, Pernambuco and Minas Gerais.

“More than 30 gigawatts (GW) will be made available through wind, solar and biomass energy,” said the minister.

The issue of renewable energy is also delicate, as it can burden the population, in the opinion of experts. This is because the MP increases the deadline for generation projects of this type of energy to begin operating in the country.

The 48-month period can be extended by another 36 months. In other words, they will have more time on the subsidy. Abrace estimates that this could impact consumers with a future increase of up to R$4.5 billion per year in energy bills.

The MP also predicts that Amapá’s energy readjustments will be adequate to other states in the North region, 9%. This was another sensitive point, since the forecast was for more than 40%.

“It wouldn’t be fair for the state’s population to bear a 44% increase in their energy bill”, reinforced the minister, referring to Amapá.