Electricity: Chamber Has Illegal Project To Suspend Tariff Increases

The Chamber Bill That Aims to Suspend Energy Price Hikes Is Not in Line With Legal Guidelines, Analysts Point Out

Electricity price hikes, which have a direct impact on inflation, were primarily influenced by the difficulties faced last year due to the water crisis.
The proposal regarding the intervention in tariff adjustments, present in Congress, was approved by the regulatory agency. However, according to analysts, the proposal is illegal and, at worst, could greatly harm the provision of electricity services to consumers and could also lead investors to withdraw their investments due to existing risks, according to lawyers and analysts interviewed by Reuters.

Chamber Approves Urgency Request That Suspends Energy Tariff Hike Bill

The Chamber of Deputies approved, this Tuesday, May 3rd, an urgency request for the national Congress decree bill (PDL) 94/22, which suspends the electricity tariff hikes in Ceará, determined by the Aneel (National Electric Energy Agency).

According to information sources from the Chamber Agency, the proponent of the electricity tariff hike suspension bill, Congressman Domingos Neto (PSD-CE), intends to modify the text in plenary to veto all hikes present in the tariffs authorized by Aneel in various states.
According to the website infomoney.com, in April, Aneel approved annual tariff hikes in the double digits for distributors in Ceará, Pernambuco, Alagoas, Bahia, Sergipe, Rio Grande do Norte, Mato Grosso, and São Paulo, which had hikes of, on average, 24.85%, 18.98%, 19.88%, 21.13%, 16.24%, 20.36%, 22.55%, and 14.97%, respectively.
The high electricity hikes, which have a direct impact on inflation, were driven primarily by the adversities faced during the water crisis in 2021. The crisis reduced the production of hydropower plants and forced energy distributors to incur higher costs for activating thermal plants.

The energy partner at Machado Meyer, Ana Karina Souza, states that there is a strong political component in the Congress movement and that the hike bill is unconstitutional, as it improperly uses the instrument of legislative decree. She states that she is not discussing Aneel’s competence to regulate charges, but the merit of the tariffs.
According to Raphael Gomes, energy partner at Lefosse law firm, it is understood that the bill is unnecessary and sets a dangerous precedent for the energy sector, which is already naturally noted for the permanence and anticipation of rules.
For Gomes, the proposal on the suspension of electricity tariff hikes may have immediate harmful effects that will directly affect consumers, as the suspension bill may cause electricity distribution companies to have difficulties covering fixed costs, impacting the maintenance and provision of services to consumers. Gomes also notes that the decisions made by Aneel are being incorrectly contested.

According to ANACE, the Chamber Bill Is an Affront

According to the National Consumers Association, which shares the view that the bill to suspend electricity price hikes is an affront to the regulatory process, as consumers are the main stakeholders in reducing electricity costs in the country. Additionally, according to the entity, more specifically the chairman Carlos Faria, the hike in electricity tariffs cannot be accomplished through a maneuver involving interference from Congress in a regulatory agency like Aneel.
Credit Suisse analysts also assessed the situation and noted that, although criticisms and actions to block price hikes are naturally common in election years, such pending issues generate movements that could affect investors’ interest in the sector.
Analysts Carolina Carneiro and Rafael Nagano from the bank state that investors might be inclined to limit their exposure to companies that have large electricity distribution units in poorer regions of Brazil (Northeast and North regions), such as Neoenergia, Equatorial, and Energisa.
Nevertheless, Credit Suisse analysts believe that contracts should be respected, “especially in a sector that continues to demand significant investments and where the government is planning the privatization of its federal energy company,” referring to Eletrobras.