Tariff Flags in 2015

Starting in 2015, with Tariff Flags now being charged, it will get harder to estimate monthly electricity-bill expenses.

In January 2015, a new signal for consumer units begins being used in the power sector. This is the Tariff Flag system.

If the YELLOW or RED Flag is "raised," you won't need to wait for the next tariff event to see your energy bill go up.

On the other hand, future adjustments will also be smaller, since the consumer will have already started paying, ahead of the tariff adjustment, the distribution company's extra energy-purchasing expense.

In short, with the RED Flag expected to be "raised" for practically all of 2015, expected average adjustments will be lower. However, electricity bills will rise, on average, 11% more than the adjustment indexes that get published.

The Average Adjustments shown in the chart were calculated using the TUSD and TE published and projected for the 28 electricity distribution companies tracked in SETE.

*The signal will follow these criteria:

• Green Flag: CMO + ESS_SE below BRL 200.00/MWh;
• Yellow Flag: CMO + ESS_SE equal to or above BRL 200.00/MWh;
• Red Flag: CMO + ESS_SE equal to or above BRL 350.00/MWh.

**CMO: Marginal Operating Cost.

***ESS_SE: System Service Charge for Energy Security

TARIFF FLAGS Tool

Our Energy Tariff Estimation Service – SETE now has a new tool: Tariff Flag estimation.

You can now track Tariff Flag estimates and their impact on tariff adjustments through the Energy Tariff Estimation Service – SETE.

Had the original schedule been followed, this consumer-signaling mechanism should have gone into operation back in January 2014.

In that case, distribution companies would have collected only about BRL 9 billion in 2014 alone. That's practically 50% of the total amount distribution companies borrowed this year through the ACR Account.

With less money lent to distribution companies in 2014, the adjustments expected for the coming years would also be smaller. On the other hand, with Red Flags active, the effect of adjustments on energy bills in 2014 would have been, on average, 11% higher.

• Indexes and rates from the Focus 2015 scenario - Market Report, from the Central Bank of Brazil, dated September 12, 2014;
• Average annual PLD in 2015 of BRL 400.00/MWh;
• 100% of the quota energy from plants whose concessions expire between 2015 and 2017 allocated to the captive market;
• compensation for Transmission companies on the order of BRL 15 billion to be paid through the CDE Account in four installments;
• Treasury contribution of BRL 9 billion to the CDE's 2015 budget;
• the BRL 19 billion in costs from involuntary exposure and thermal-plant dispatch for 2014 will be covered with ACR Account loans, paid in two installments (2015 and 2016);