Paraguay uses energy paid by Brazilians to Itaipu – 01/27/2023 – Market

Brazilians are paying part of the Itaipu energy consumed by Paraguay on their electricity bill. Due to this considered irregular use of Brazil’s energy quota, the neighboring country already accumulates a debt of US$ 1.8 billion (R$ 9.2 billion) with Brazil.

By law, distributors in the South, Southeast and Midwest purchase energy from Itaipu, and it makes up the final amount of the tariff paid in these regions.

The warning about the debt is in a letter sent to Itaipu on December 29 by EmbPar (Empresa Brasileira de Participações em Energia Nuclear e Binacional). This new state-owned company is the one who buys the energy from Itaipu on the Brazilian side after the privatization of Eletrobras. The letter is signed by the president, vice-admiral Ney Zanella dos Santos, and is addressed to each director general of the plant, vice-admiral Anatalicio Risden Junior, for Brazil, and Manuel Maria Cáceres Cardozo, for Paraguay.

The new director general of Itaipu, federal deputy Enio Verri (PT-PR), announced this Thursday (26) by president Luiz Inácio Lula da Silva (PT), will find detailed material on the issue.

The document, which Sheet had access, is accompanied by an extensive technical note of 39 pages that deals with the evolution of this account. She brings details to explain how Ande (National Electricity Administration), the state-owned company responsible for purchasing energy from the neighboring country, subcontracts — that is, it asks for less energy than it actually knows it will consume. .

As a rule, this company advises at the end of every year how much it will consume in the following year, and the remainder becomes Brazil’s quota.

As described in the document, since 2018, Ande errs in the projection for less and enters the quota reserved and paid by Brazil. EmbPar claims that the partner’s procedure disrespects the treaty that governs bilateral relations in Itaipu.

Subcontracting, associated with the use of part of the Brazilian quota, is pointed out by specialists as one of the factors to explain the difference in the price of energy for the final consumer on each side of the border, which is always more expensive in Brazil.

In 2017, the MWh (megawatt-hour) of energy cost Brazilians US$ 38.22 (R$ 195) and US$ 27.04 (R$ 138) for Paraguayans. Last year, when the first tariff reduction took place in 13 years, Paraguayans returned to pay a similar amount to that of five years before, US$ 27.57 (R$ 140). Brazilians, despite the reduction, paid US$ 50.49 (R$ 257).

The essential principle of the binational treaty is that everything in Itaipu is divided fifty-fifty between Brazil and Paraguay. As Paraguay consumes less energy, Brazil buys the remaining part of the partner. Currently, Brazil gets about 85% of Itaipu’s energy — its rightful 50%, plus the portion that Paraguay does not consume.

Within this context, the invasion of the Brazilian energy quota is considered an even greater nonsense by the specialists who follow the theme.

The primordial root of the clash is the surplus energy of the binational plant.

Itaipu does not generate profit. The sale of its energy should only cover the costs of the plant and the payment of the debt for the construction. When the plant started to generate energy above what it needed to pay the bills, it was agreed that this excess, when it occurred, would cost less.

The sharing of this surplus generated debates. Brazilians wanted it to be proportional to the quota. That is, if Brazil consumed 90% of the energy, it would be entitled to 90% of the surplus. The Paraguayans insisted on, and took, the fifty-fifty split, claiming that this would preserve the principles of the treaty.

Over the years, Paraguay’s economy grew, attracting industries that needed more energy. Ande, however, did not make significant changes to the annual quota request. Paraguay simply started to use increasing portions of the surplus until it was completely consumed. It was then that he invaded the Brazilian quota.

Ande, however, denies the wrongdoing. It claims to consume surplus energy because Itaipu has surplus power. As consumption is done in a flow of energy, this technical discussion feeds an endless debate and, by extension, the billionaire account reported by EmbPar.

RENOUNCEMENTS, DENOUNCEMENTS AND ATTEMPT TO IMPEACHMENT

The fact that EmbPar presented the survey at this time received different interpretations among those who had access to the document.

Some believe it acts as a safeguard against eventual liability for the company and its staff. Itaipu, as it is binational, cannot be questioned by any authority on either side of the border. EmbPar, on the contrary, can be held responsible for allowing billionaire damage to Brazilian consumers.

Others believe that the document is part of a movement to arm Itaipu in the negotiation of Annex C of the bilateral treaty.

The possibility of revision will be opened in March, after the settlement of the last installment of the debt contracted for the construction of the plant. As Paraguay is in the electoral period, the prospect is that the partners will meet in the second half of the year. The assessment is that Brazil will have an asset by proving that it has to receive almost US$ 2 billion (R$ 10 billion).

According to experts who know Itaipu inside out, the particularities of the Paraguayans and the details of this divergence, the Lula government must prepare not only for a tough negotiation of Annex C and other issues, but also pay attention to the disclosure of the process by the Paraguayans.

According to Sheet found out with which it followed the process, Brazil identified the invasion of the quota in the second half of 2018. Alerted by the technical area, the president of Eletrobras, at the time, Wilson Ferreira Júnior, informed Itaipu that Paraguay consumed volumes greater than those projected by Ande . To make it clear that he considered his partner’s behavior to be serious, he advised that he would not pay for energy that he did not receive.

Ande, then chaired by Pedro Ferreira, began the argument about the use of excess energy.

As Wilson did not budge, the fate of the invoice needed to be debated internally at Itaipu. There was no resolution in the board, and the issue went up to the board. The impasse proved insurmountable. The case was then taken to the diplomatic area. In Itaipu jargon, this superior forum is called Altas Partes.

The account that year was budgeted at US$ 54.9 million (R$ 279.7 million).

In the meantime, Jair Bolsonaro (PL) won the election and changed positions of command. General Joaquim Luna e Silva was sworn in in February 2019 as the general directorate of Itaipu promising a reduction in the tariff. Informed about the pending issue with Paraguay, he helped to mobilize the new chancellery, and the negotiation was streamlined.

In March, President Mario Abdo Benítez visited Bolsonaro and gave the green light for an agreement. In a goodwill gesture, the Brazilian representatives did not even force their hand to receive the amount owed. A change in accounting was defined, with the creation of a post-paid system. Monthly, there would be a reckoning between the projected energy in the year and the one actually consumed in each month.

The agreement was sanctioned and recorded in minutes on May 24, signed by the ministers of foreign affairs. It was two objective pages. The content would then be transferred to contracts to be signed by Ande and Eletrobras.

Paraguayans, however, asked for time before the announcement, claiming that their government needed time to create a publicity piece explaining the reasons for the change. Weeks later, a video began to be released on local TV. It explained that Paraguay needed to be honest when purchasing energy from Itaipu, and it barely aired.

In July, a turnaround occurred. The agreement was made public in Paraguay in the form of a denunciation of “the secret minutes of May 24”.

All versions released were variations on an authoritarian act by Brazil against Paraguay. Pressured by Bolsonaro, Benítez would have allowed changes in the rules for paying energy that would raise local costs annually by US$ 200 million (R$ 1 billion). The local political environment has deteriorated.

Five involved in the negotiations for Paraguay resigned, including the Minister of Foreign Affairs, the director general of Itaipu and the president of Ande.

At the same time, information began to leak that the minutes would be part of a scheme in which cheap energy from Itaipu, on the Paraguayan side, would be sold to a trading company in Brazil linked to President Bolsonaro’s family. The Public Ministry opened an investigation.

On July 31, the opposition announced that it would seek impeachment. In Paraguay, the procedure can be done in a few days. In 2012, then-president Fernando Lugo was ousted in just 36 hours.

The next day, August 1, Benítez fought back. Officials posed signing a document canceling the minutes. He spoke alongside his wife. The mood was one of national commotion.

The risk of impeachment only ended when Bolsonaro agreed that Brazil would annul the minutes. Bordered by left-wing governments, the movement was interpreted as a political strategy to preserve the support of Benítez and his conservative party, Colorado. The two treat each other like friends.

With the doors closed to defend consumers in Brazil, Eletrobras and Itaipu were instructed to account for and disclose any future invasions of the Brazilian quota. The numbers consolidated by EmbPar demonstrate that the practice was not only maintained but the amounts increased.

When contacted by the report, EmbPar, Ande and Itaipu did not comment until the publication of this text.

TECHNICAL DICTIONARY OF THE BRAZIL-PARAGUAY CONTROVERSY

• EmbPar (Brazilian Company of Shares in Nuclear and Binational Energy): State-owned company responsible for trading energy from Itaipu in the Brazilian market. Linked to the Ministry of Mines and Energy, it was created to replace the privatized Eletrobras in carrying out public policies in the sector and to take over the activities of Itaipu Binacional and Eletronuclear, which is responsible for the Angra 1, 2 and 3 plants.
• walk (National Electricity Administration): It is the state-owned company responsible for commercializing energy from Itaipu in Paraguay
• Energy tied to full power: volume of generated energy that can be contracted from an installed capacity of 12,153 MW, which is 75 million MWh. Roughly speaking, in industry jargon, this type of energy is equivalent to what is called guaranteed energy. Detail. Itaipu has a power of 14,000 MW, but it was agreed to remove 2 turbines and the operating energy from the calculation, so, for practical use, 12,135 MW were defined
• Energy linked to power hired: share of energy that is defined for buyers on each side of the border. In practice, at the end of each year, the Paraguayan Ande defines the quota of energy that it will consume, and the rest automatically becomes the quota of the Brazilian EmbPar
• Energy supplied Equivalent to the energy actually consumed by each part

• Unbound Energy: All energy generated above 75 million MWh. At its best, production reached 113 million MWh. In the Brazilian market, it is equivalent to what is called surplus energy. As this energy is not directly associated with the plant’s costs, its price is lower. It is basically equivalent to the cost of paying royalties, and is generally around US$ 6. Brazil even demanded that the surplus be proportional to the annual bound energy (quota) of each party. However, initially, it was agreed that it would be divided in half. In practice, however, Paraguay started to keep all the surplus. Thus, the final price of energy in Brazil is always higher than in Paraguay