the government creates a new tariff flag to deal with the water crisis

Department announces a new tariff flag to address the water crisis, with a value greater than the red flag of level 2. | Photo: Marcello Casal Jr / Agência Brasil

The federal government decided on Tuesday (31) to create a new tariff flag to cover the high costs of power generation amid the water crisis. The announcement was made by the Ministry of Mines and Energy at the end of an extraordinary meeting of the Chamber of exceptional rules for the management of hydropower (CREG).

On the agenda, the National Electric Energy Agency (Aneel) stressed that the collection already carried out thanks to the additional charges of the flag, at the current red level 2, is insufficient to face the real costs observed and expected to cover the coming months – it will still be dry. “Given the existing collection deficit, exceeding 5 billion reais, and verified high costs, especially in thermoelectric production, a decision was approved for the regulatory agency to implement the specific level of the tariff flag, titled “Water scarcity”, “informed the MS. The value will be R $ 14.20 per kWh, from September 1, 2021 to April 30, 2022.

According to the ministry, the sign “Hydric Scarcity” will lead to an increase of 6.78% of the average tariff of regulated consumers, those who are connected to energy distributors, in the case of individuals.

The rate applied until August 31 was 9.49 BRL per 100 kilowatt-hours consumed, readjusted two months ago, with an increase of 52%. After this change, there was already a wait for the new top, to be promoted after a review of the calculation parameters. According to Aneel, this would be necessary because this actual readjustment from July would not take into account the price of production in the second half of the year – the risk was indicated by Aneel’s technical area, which signaled the need to ‘a total readjustment between 84.3% and 92.3% in red flag 2 to explain the increase in supply.

Flag readjustment to pay for the crisis

Power generation costs have advanced considerably thanks to the dispatch of thermal power plants, widely used in an attempt to bypass the water crisis and prevent the depletion of hydroelectric reservoirs, which are at worrying levels due to historical shortages. During the twelve-month period ended in July, the average energy tariff in the country increased by 20%. The July hike has already had a strong impact on inflation, as well as other factors such as high commodity prices and breaks in production chains.

Last week, Economy Minister Paulo Guedes said there would be a further readjustment. The statement was accompanied by a period of change of tone for the federal government in the face of the water crisis, with a series of announcements related to energy savings – voluntary for industry and for small consumers. and compulsory in the public service.

So far, the Ministry of Mines and Energy has ruled out a shortage risk scenario, but a recent note from the National Electricity System Operator (ONS) warns of the risk of a blackout if the country does not increase its energy supply by 8% during the months of September and November (when the rainy season begins and the rains are expected to resume).

Bonus confirmed for reduction of household consumption

At the same time as the announcement of the so-called water scarcity tariff flag, the Ministry of Mines and Energy confirmed the rules proposed for the incentive program for the voluntary reduction of electricity consumption, applicable to small consumers, such as individuals. They will be effective from September, with a bonus of R $ 50 per 100 kWh reduced, limited to the savings range between 10% and 20%. Low-income consumers who subscribe to the social tariff will also be able to participate under the MME.

It has not been confirmed where the resources will come from to pay the “price” to engaged consumers. The bonus may be paid with money from the System Service Charges (ESS) fund, which is already charged on the invoice.

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