ABRACE proposes an agenda to reduce electricity bills by R$30 billion per year

A HUG (Brazilian Association of Large Industrial Energy Consumers and Free Consumers), led by the former executive secretary of the Ministry of Mines and Energy, Paulo Pedrosa, proposed an agenda for reduce the electricity bill by R$30 billion per year, with measures that include the transfer, within a transition period of 10 years, of the costs of Spanish Sporthorse (Energy Development Account) to the Union’s coffers.

The proposal, which will be presented to the MME and representatives of the National Congress, also provides for a defensive agenda to avoid additional costs on the electricity bill of R$16 billion annually. 

According to the association, The objective is to recover the economic logic of the electricity sector, correcting and modernizing tariffs, as well as reducing asymmetries between the free and regulated markets. 

ABRACE is one of the most influential associations in the electricity sector as it brings together more than 800 units that represent almost 40% of industrial electricity consumption in Brazil. The membership includes companies such as Vale, Gerdau, Usiminas, Rio Tinto, CSN, BHP Billiton, ThyssenKrupp, Alcoa, Ambev, Cargill, Nestlé, Bayer, Votorantim, GM and Braskem.

"For decades, the electricity sector has accumulated distortions and inefficiencies that hinder the benefits that the supply of clean and competitive energy could provide to the country and society.“, said Victor iOcca, director of Electric Energy at ABRACE.

“Energy competitiveness is fundamental for the sustainable growth of the Brazilian economy. It is essential to implement policies that promote the reduction of energy costs as an essential step to revitalize the national industry and stimulate economic development”, he highlighted.

Check out a summary of ABRACE’s proposal To reduce your electricity bill:

Immediate actions

1- Eletrobras Thermal Plants – contracting of 8.000 MW of thermal plants imposed by Law No. 14.182/21 (Eletrobras Capitalization Law) → annual costs of around R$28 billion from 2031.

Proposal: reduce the obligation of the amount to be contracted by half (changing to 4.000 MW).

2- PROINFA – recontracting of PROINFA plants for another 20 years, a measure imposed by the Eletrobras Capitalization Law → additional cost of R$27 billion between 2031 and 2051.

Proposal: remove the renewal of PROINFA contracts from the law, since the sources benefiting are already competitive.

3- Coal thermal plants – recontracting of thermoelectric plants powered by mineral coal → this cost is expected to reach R$1,1 billion in 2024.

Proposal: MME veto guidance for any bill containing this content.

Short-term actions

1- Energy Development Account (CDE) – sectoral fund that brings together public policies for the electricity sector → the CDE budget should reach R$37,2 billion in 2024.

Proposal: implement a 10-year transition until the entire CDE is funded by the Union Budget.

2- Irrigation discount – discounts granted to irrigators and aquaculturists during special hours can reach 90% → this item is expected to reach R$1,2 billion in 2024.

Proposal: reevaluate the discount percentages, revoking the current rule (Ordinance No. 45/92 of the Ministry of Infrastructure) and publishing new guidelines in a decree.

3- Discounts for low voltage sources encouraged – if the discount for low voltage (Group B) is allowed, in a market opening scenario, there is the prospect of an explosion of this cost in the CDE → today, only Group A has access to the discount, which amounts to around R$ 12 billion a year.

Proposal: prohibit the granting of discounts on distribution and transmission tariffs to consumers from encouraged sources in Group B, as the benefit affects wire tariffs, which are significantly more expensive compared to Group A.

4- Power Charge for Capacity Reserve (ERCAP) – the form of distribution of the burden has not yet been defined by ANEEL.

Proposal: the apportionment must take into account an economic signal, shifting consumption from the most critical time, the peak, to less busy times.

5 – Modernization of tariffs – in addition to tariffs being entirely dependent on the amount of electricity consumed, regulated consumers do not receive information about system conditions in the tariff value.

Proposal: base the tariff on contracting demand for each consumer, avoiding additional costs to the system as a reflection of fluctuations in consumption and improving tariffs so that low voltage consumers perceive price signals in order to modulate their consumption.

6- System Service Charges (ESS) – any deviation in operation in relation to what the model predicted, generates charges → in recent years, especially in the water crisis (2021), the ESS exceeded R$50/MWh in some periods.

Proposal: incorporate a more realistic risk aversion in the optimization models to predict the dispatch of these plants that are currently out of merit, contract the updating of models through bidding and open space for price formation per offer.

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