Lula signs MP to reduce electricity bills and expand subsidies for renewable sources by R$4.5 billion

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According to the government, the objective is to reduce consumers’ electricity bills by 3.5%. The measure also provides for an extension of the deadline for using subsidies for wind and solar plants. Eletropaulo power transmission line, in São Paulo Marcelo Brandt/G1 President Luiz Inácio Lula da Silva (PT) signed this Tuesday (9) a provisional measure that aims to reduce the electricity bill by 3.5 % in 2024, with the payment of loans taken out by distributors. The measure, on the other hand, provides for an extension of the deadline for renewable energy plants, mainly solar and wind, to receive full subsidies in wire usage tariffs. According to the Brazilian Association of Large Energy Consumers and Free Consumers (Abrace), the cost of extending the deadline will be around R$4.5 billion per year – an amount that will be passed on to consumers. In other words, the 3.5% reduction will occur in the electricity bill of consumers who purchase energy from distributors, such as residential and rural consumers, for example. But, at the same time, there could be an addition of R$4.5 billion per year to the bills of all consumers – including the bills of industrial consumers, who buy energy on the free market and can negotiate their contracts with companies. “Naturally, the electricity sector accommodates legitimate interests in public policy choices that affect energy tariffs, but it is necessary that costs and benefits are always made clear to guarantee the best choices for the country”, says Abrace. Before signing the provisional measure, Lula was approached by journalists about a possible change in command of Petrobras. A wing of the government defends the departure of Jean Paul Prates as head of the state-owned oil company. Lula greeted journalists, but did not respond to questions (see the video below). Lula greets journalists, but does not answer the question about the exchange at Petrobras What the government’s measure envisages To achieve the effect of a 3.5% reduction in the bill, the government intends to advance resources provided for in the Eletrobras privatization law and allocate them payment of the “Covid account” and the “water scarcity account”. These accounts are the result of emergency transactions made by distributors to deal with additional costs caused by the pandemic – which generated an economic crisis and an increase in defaults – and water shortages between 2020 and 2022 – when the lack of rain forced companies to contract more expensive energy. . Now, the cost of these loans corresponds to a portion of the tariff adjustments, which increase the electricity bill. The resources foreseen in the MP come from: the Northern regional fund foreseen in the privatization of Eletrobras, which will be used in the tariffs of the states in the region – including Amapá; of the anticipation of around R$26 billion from Eletrobras, which would be deposited in the Energy Development Account (CDE). This money will be used to pay off the loans; of mandatory investments in research, development and energy efficiency by distributors. In an interview with journalists on the 3rd, the Minister of Mines and Energy, Alexandre Silveira, said that the advance of R$26 billion in Eletrobras deposits will pay off the distributors’ loans and there will still be an amount left over. With the amount, the government intends to: use around R$15 billion to pay off expenses in the energy sector that were necessary in the acute period of the Covid pandemic (when tariffs were frozen) and in the period of water scarcity, in 2020 and 2021 (when the government had to contract thermal energy, which is more expensive than hydroelectric power). use the remaining approximately R$11 billion to reduce electricity bills. In addition to allocating resources to the electricity bill, the government will also extend the deadline for plants to come into operation and receive subsidies, increasing the cost by R$4.5 billion for consumers. Understand the increase in cost The government is trying to resolve the queue of renewable projects awaiting capacity to flow energy into the national system. The queue of plants without guaranteed flow of energy produced is a consequence of a law published in March 2021 and the decree that regulates it. The law gradually ends discounts on tariffs for using distribution and transmission systems – which are subsidized and form part of one of the charges on the electricity bill. Furthermore, the text established that businesspeople who wanted to receive the discounts had to submit the request to Aneel within 12 months – which generated a “gold rush” on the part of the plants. The scenario was intensified thanks to a decree issued by then-president Jair Bolsonaro (PL), in 2021. The text made the authorization process more flexible, which increased the number of plants authorized, but which would not be able to operate due to lack of capacity in the system. After having their requests accepted by Aneel, the plants needed to come into operation within 48 months. It is this period that the government intends to extend, giving another three years for the completion of the projects.

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