How Much Can Your Electricity Bill Rise?
Adjustments Across 28 Distribution Companies, 2013-2019:
The extraordinary tariff adjustment carried out in January 2013 reduced, on average, 17% of the Application Tariffs* charged in 2012. The average effect of that reduction felt by consumers was on the order of -19%.
The "Average Adjustment" explains how much economic tariffs need to be repositioned so distribution companies collect enough revenue to cover their new economic and financial costs.
The "Average Effect Felt by the Consumer" measures the variation in Application Tariffs resulting from the tariff event. Basically, it indicates how much the electricity bill will change after a tariff event, whether an adjustment or a review.
When Application Tariffs diverge from Economic Tariffs**, the "Average Adjustment" also diverges from the "Average Effect Felt by the Consumer."
Note* Application Tariffs - These are the tariffs actually used to calculate consumer bills. These tariffs cover distribution companies' annual economic costs and financial costs.
Note** Economic Tariffs - These are the base tariffs used for tariff adjustments. These tariffs cover only distribution companies' annual economic costs.
AES-SUL's 2014 adjustment illustrates how much these indices can vary. While the "Average Adjustment" was 16.42%, the "Average Effect Felt by the Consumer" was 29.54%.
Under the new-expense scenario TR Soluções mapped out for electricity distribution companies, the "Average Adjustments" for the coming years should be 12% in 2015; 15% in 2016; 8% in 2017; 5% in 2018; and 0% in 2019.
The "Average Effects Felt by the Consumer" relative to these average adjustments should be 9% in 2015; 1% in 2016; -7% in 2017; 0% in 2018; and -4% in 2019.
The average results indicate that, in terms of increases in the electricity bill, the next two years should see bigger jumps than those already seen in 2014. It's also possible to see that Application Tariffs should fall starting in 2017.
This expense scenario is based on basically three factors:
- All energy from the Quota Regime will be allocated to the Captive Market;
- The Treasury will contribute BRL 9 billion to the CDE in 2015;
- Average annual prices in the short-term energy market (PLD***) should evolve as indicated in the August 2014 Newave output deck.
Note*** Average annual PLD figures are taken from the official Newave output deck for the August/2014 PMO;
Scenarios for 2015 and 2016:
- Annual payment of 20% of the 2013 Loans – from the CDE's liability;
- Annual payment of 50% of the 2014 Loans – from the ACR Account;
- Quota-Regime Energy inflow of 4,913 average MW at BRL 38.00/MWh;
- Treasury contribution to the CDE of BRL 9 billion in 2015 and BRL 6 billion in 2016;
- PLD in 2015 of BRL 350.00/MWh and in 2016 of BRL 210.00/MWh.
2017 Scenario:
- Payment of 20% of the 2013 Loans from the CDE's liability;
- Quota-Regime Energy inflow of 466 average MW at BRL 40.00/MWh;
- PLD in 2017 of BRL 165.00/MWh.
2018 and 2019 Scenarios:
- Payment of 20% in 2018 and in 2019 of the 2013 Loans from the CDE's liability;
- BRL 6 billion Treasury contribution to the CDE;
- PLD in 2018 and in 2019 of BRL 150.00/MWh.
The Average Tariffs shown in the chart were calculated using the TUSD and TE published and projected for the 28 electricity distribution companies tracked in SETE.
The Average Tariffs shown in the chart were calculated using the TUSD and TE published and projected for the 28 electricity distribution companies tracked in SETE.
The combination of the A-1 Auction not being held in 2012 with reduced rainfall in the Southeast region starting in 2013 drove up distribution companies' energy-purchasing costs, dramatically changing the relationship between Application Tariffs and Economic Tariffs.
To ease the impact of energy-purchasing costs on tariff adjustments, after the Extraordinary Tariff Review carried out on January 24, 2013 (MP 579/2012), the Energy Development Account (CDE) lent distribution companies about BRL 10 billion in 2013.
Since pressure on energy-purchasing costs continued through the first half of 2014, new loans were made to distribution companies via the CCEE, through what's known as the ACR Account. Officially, about BRL 17.7 billion has already been allocated to the ACR Account.
What should we expect from adjustments in the coming years? Concretely, we know that starting in 2015, repayment of these loans begins. Fortunately, this timeline also coincides with more energy entering distribution companies' purchasing portfolio under the Quota Regime. If short-term market energy prices (PLD) fall in the coming years and the Treasury keeps contributing about BRL 9 billion annually to the CDE, we can expect that, starting in 2017, Application Tariffs will stop stealing the spotlight in tariff calculations, moving closer to Economic Tariffs once again.
In short, if your tariffs already saw sharp increases in 2014, they'll likely see further increases in 2015 and 2016, only starting to fall again from 2017 onward.
However, it's always worth reminding readers that TR Soluções' analysis used average tariff figures, both for published adjustments and expected adjustments. So each distribution company's specific tariff figures may diverge from the average figures presented.
Treasury Contributions to the CDE
Our Energy Tariff Estimation Service – SETE now has a new tool: annual mapping of CDE revenue and expenses.
Our users can now easily build annual CDE Quota scenarios.
TR Soluções' New Look and New Home
Starting in July, we've moved to a new address, restructured our business, and redesigned our website. Besides TR Soluções, we've also launched TR Soluções WEB.
TR Soluções continues developing customizable computer programs geared toward the needs of the electricity, water, and gas sectors.
TR Soluções WEB, meanwhile, provides services for consolidating, simulating, and analyzing power-sector data related to tariff calculations.