Tariffs - A Little Bit of Everything in 2016
After all, will 2016 truly be a year of relief for energy tariff adjustments, or will it once again be a scenario of increases like those seen in 2015?
The answer to that question depends on where in Brazil you consume electricity. As shown in the chart below, for 2016 the expected variations in application tariffs for the residential market, across the 38 distribution companies3 tracked by TR Soluções on its SETE system, should range between +17% and -17%.
Source: TR Soluções (each bar represents one of the 38 distribution companies monitored by SETE).
If we weight by these distribution companies' market size to calculate the average effect felt by the Brazilian residential consumer, tariffs should fall, on average, 1.18% in 2016. For consumers in the South, Southeast, and Center-West regions, electricity tariffs should be, on average, 4.29% cheaper. Meanwhile, those living in the North and Northeast regions should see an average increase of 9.28%.
Overall, 2016's adjustments will indeed be much more subdued than those seen in 2015, a result of some expected reductions in energy-supply costs. The most impactful reductions are being seen in the Energy Development Account (CDE) charge, still under discussion at ANEEL, but which could fall 36%4; and in the ITAIPU Power Pass-Through (-32%)5, which is priced in US$/kW. In both cases, these costs, now reduced, have historically been borne almost exclusively by consumers located in the South, Southeast, and Center-West regions.
This trend is also explained by the entry into the market of a significant new volume of energy from the Quota Regime (+3,000 average MW). Although the contracting price for this energy was higher than the energy renewed in 2013 under the same regime, the average price of energy from the 29 plants auctioned in November remained low, around BRL 125.00/MWh, compared to values seen in the regulated market for different power-generation sources6.
Once again, this relief in the average energy price will tend to further reduce the amounts charged by distribution companies located in the South, Southeast, and Center-West regions. This happens due to the redistribution of this energy's quotas among distribution companies, also still under discussion at ANEEL, but which could reduce by 25%7 the volume of Quota energy allocated to distribution companies in the North and Northeast regions.
On the other hand, in the short term there are pressures on supply-cost variations driven by: uncertainty in consumption growth; inflation as measured by the IPCA and IGP-M; and the dollar exchange rate, bearing in mind that it accounts for the cost of energy from ITAIPU, Angra I and II, and several thermal power plants.
In the medium term, the ghost of compensation for Existing System Basic Grid assets still looms, along with the GSF affecting part of the hydroelectric plants, and the financial costs tied to distribution companies' surplus energy volumes, a reflection of the sharp drop in electricity consumption.
Additionally, any legal or regulatory change can affect all distribution companies, in unequal proportions depending on characteristics inherent to each one.
3 95% of the Brazilian market.