Law approved to reduce electricity rates by 20.2%

Comments Off | 01-17-2013

Law no. 12.783, extending electricity generation concessions and reducing industry charges so as to provide lower rates to consumers, was published in the Official Federal Gazette on Monday (January 14). According to the Ministry of Finance, the average of 20.2% (see table) reduction in rates will lower inflation between 0.5 and 1 percentage point, as measured by the Extended National Consumer Price Index (IPCA).

The measure serves to stimulate the economy by putting more money in the hands of consumers, who will see bills reduced by around 16.2%, while also lowering costs in industrial production. By using high voltage electricity, factories will see greater savings of between 19% and 28% due to the lower cost of distribution in the high voltage network.

According to the Ministry of Mines and Energy, the energy requirements of the country in the coming years has already been contracted and a number of investments have been made in new generation and transmission works. In 2012, 3,548 megawatts (MW) and 2,777 km of transmission lines were put into operation. Further plants, with a capacity to generate 42,000 MW, are under construction and around 8,500 MW and 7,800 km of new transmission lines are scheduled to go into operation in 2013.

Taxes

The cut in the cost of energy will be generated by two factors: the reduction of federal taxes paid by the industry and the reduced average rate for generation and Permitted Annual Revenue from transmission. Costs will be reduced since the infrastructure is old and as of 2013, there will no longer be any assets to depreciate or amortize. Some hydroelectric plants, for example, have been in operation for 70 years and have already paid for the investment made in their main equipment and structures. This reduction in the cost of production and transmission corresponds to 13% of the average reduction to the end consumer.

The other 7% will come from reduced charges to the energy sector. The Federal Government will contribute around R$ 3.3 billion annually to the Energy Development Account (CDE) to maintain social programs such as the Electricity for All program (LPT), the Social Rate for low-income families and the subsidy for efficient electricity generation in Isolated Systems. These programs had been funded by the energy sector, which will now pay 75% less to the CDE. In addition, charging of the Fuel Consumption Account (CCC) will be abolished and its costs reduced to efficient levels.

The charging of the Global Reversion Reserve (RGR) will also be abolished for distributors, new transmission projects and extended concessions. It will only be maintained for generation and transmission projects in operation and under construction which currently pay this charge.

The annual contributions of R$ 3.3 billion from the National Treasury to the CDE will come from credits that the Treasury and Eletrobras possess through the Itaipu Dam, resulting from the debt acquired for construction of the project.

Source:
Agência Brasil

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