June 3, 2016
Provisional Measure No. 706, of 2015
Item XI, however, is different: it establishes that: "provide funds for the expenses covered by Article 4-A of Law No. 12,111, of 2009." Article 4-A was created by MP 706 itself, and establishes that:
Article 4-A. Concessionaires holding distribution concessions that provide service in states whose capitals weren't interconnected to the National Interconnected System - SIN on December 9, 2009, will have recognized, for tariff purposes, the costs of purchasing energy, and, for CCC reimbursement purposes, the total generation cost, needed to cover the difference between actual load and the regulatory market, where:
I - the actual load to be used in the 2016 tariff proceeding will factor in the actual technical and non-technical losses recorded in 2015; and
II - for subsequent years, from 2017 through 2015, the actual load will be calculated factoring in an annual 10% reduction of the difference between the actual technical and non-technical losses recorded in 2015 and the regulatory percentage ANEEL set in the 2015 tariff proceeding.
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This article apparently allows distribution companies' actual losses, rather than regulatory losses, to be passed on to consumers of the concessionaires Amazonas Energia (Amazonas), Cea (Amapá), Boa Vista, and CERR (Roraima).
For AmE, a company SETE tracks, regulatory non-technical losses for 2015 were 41.54%, calculated over the low-voltage market.
Actual non-technical losses in 2015, meanwhile, were about 115%1, also calculated over the low-voltage market.
By applying Article 4-A, the volume of non-technical losses factored into 2016 tariffs will practically triple relative to the volume factored in for 2015.
A transition between actual losses and regulatory losses was also established. Only in 2025 will regulatory non-technical losses again be factored into the tariffs of consumer units served by distribution companies in the country's North region.
The origin of the funds tied to factoring in actual losses isn't entirely clear. TR Soluções' interpretation is that there's a duplication in the source of funds: one coming from including these losses in application tariffs, as described above; and another coming from CDE-account funds.
In Letter No. 150/2016-DR, page 14, ANEEL calculates that the impact on CDE expenses from not factoring in the efficient loss level will be BRL 423 million per year.
Article 3 of MP 706 also establishes a transition regarding CDE quota allocation, such that by 2035 there will no longer be any difference in the CDE quota value between the South/Southeast/Center-West and North/Northeast submarkets.
This transition, however, only begins in 2018. Based on current CDE quota tariff values, TR Soluções quantified that this transition's isolated effect would play out as follows: each year, the North/Northeast region's CDE quota tariff would rise about BRL 1.40/MWh, while the other regions' tariffs would fall by about BRL 0.40/MWh.
Article 4 This article defines how to quantify the energy price in the Regulated Contracting Environment – average ACR. The average ACR's variation defines the adjustment for bilateral contract tariffs and generation tariffs for Fuel Consumption Account – CCC reimbursement purposes.
Article 4 of MP 706 establishes that, through 2020, the average cost of capacity and energy traded by distribution agents in the ACR should not factor in sectoral charges.
For AmE, the ACR value factored into the 2015 tariff adjustment was BRL 278.02/MWh. Applying the new legislation, that figure would become BRL 186.49/MWh.
A transition was also established for calculating the average ACR value. Starting in 2021, 1/15 of charges will be factored in, 2/15 the following year, and so on until 2035, when the average ACR will be calculated the same way it is today, factoring in charges.
This article's impact falls on distribution companies' energy-purchasing expenses and on CCC expenses.
In Letter 150, page 10, ANEEL explains that the 2016 average ACR, calculated at BRL 295/MWh, would be reduced to BRL 223/MWh if charges were excluded from the calculation.
In Letter No. 150, page 14, ANEEL also calculates that the impact of reducing the average ACR will be BRL 245 million per year.
TR Soluções estimates this impact could be about BRL 800 million per year. To calculate the additional impact from reducing the average ACR, we quantified the difference between BRL 295/MWh and BRL 223/MWh, that is, BRL 72/MWh, and then applied it to the energy volume covered by the CCC.
TR Soluções estimates that volume at 1.2 average GW (450 MW from Isolated Systems, 550 MW from Manaus thermal plants, 130 MW from the Balbina plant, plus another 70 MW from other small thermal plants). That would result in BRL 757 million per year (1200x8760x72), not BRL 245 million.
Given the points highlighted above, the CDE's expenses would see the following adjustments:
- A new expense from not factoring in the efficient loss level, of BRL 423 million per year;
- A new annual expense from reducing the average ACR, of BRL 757 million per year;
However, since there's uncertainty regarding the previous items' values, TR Soluções chose to build a scenario in SETE, version 10.41, factoring in:
- Additional CDE-account expense of BRL 980 million;
- Reduced average ACR value already in 2016, to quantify distribution company AmE's energy-purchasing expenses;
- Higher non-technical loss volume, to quantify distribution company AmE's required energy.
1There's uncertainty in calculating this figure due to the lack of public information on the energy injected into distribution systems.