What was already known in 2014 was that in 2015 billing would begin for the BRL 11 billion borrowed in 2013 for distribution companies. That would be 5 (five) annual installments adjusted by the IPCA. Also starting in 2015 is billing for the other BRL 17.7 billion borrowed in 2014 for distribution companies to cover their extra energy-purchasing expenses. In this other case, there will be 2 (two) annual installments adjusted by the CDI plus a return rate. To close out distribution companies' energy-purchasing expenses for November and December 2014, about another BRL 2.5 billion is still needed...
What's certain is that distribution companies' involuntary exposure, first caused by the A-1 auction not being held in 2012, later worsened by new decontracting, has gradually been giving way to new energy-purchase contracts signed at different times: A-1 in 2013; A-0 and A-1 in 2014, and now the 2015 adjustment auction.
Even though these new contracts are usually more expensive than the decontracting seen in 2012, 2013, and 2014, the reduction in involuntary exposure that comes with the new contracts eases financial pressure on distribution companies, stopping the need for a new flood of funds in the coming years.
Average Adjustment Expected for 2015 Is +49.92%, on Top of the Tariff Flags' Effect
The year begins with the realization that 2014's most pessimistic tariff expectations for 2015 were wrong, since the scenario is even worse than anyone could have imagined. Nobody could have predicted that the Treasury would stop contributing to the Energy Development Account - CDE in 2015, since, after new purposes were established with the 2013 publication of Law 12,839, the Treasury had always done its part every year, investing funds so the CDE could meet its new commitments, including: funding discounts on tariffs granted to low-income consumers; rural consumers; irrigation; public water, sewage, and sanitation service; rural electrification cooperatives; and producers and consumers of renewable energy such as wind, biomass, photovoltaic, and small hydro (PCH) sources. Before Law 12,839 was published, these discounts were borne solely by other electricity consumers who weren't granted any kind of tariff subsidy.
In December 2014, ANEEL authorized a +46.14% adjustment relating to power pass-through costs for the Itaipu hydroelectric plant for 2015. Itaipu energy usually represents about 20% of the energy volume supplied by that plant's quota-holding distribution companies.
Given that the Treasury doesn't intend to make contributions to the CDE, in February 2015 ANEEL presented a proposed adjustment of +1200% in CDE quotas. That cost item's increase alone represents an average upward bias of 23.76 percentage points in electricity tariffs.
With the sharp increase in Itaipu and CDE costs, distribution companies won't be financially able to wait for 2015's ordinary tariff adjustments to pass these new expenses on to their consumers. Given this, there have been reports that, by March of this year, an extraordinary tariff adjustment could be authorized in order to equalize electricity distribution companies' expenses with their revenue.
Beyond the final decision on the CDE quota amount, expected by the end of the public consultation period on the topic, what remains uncertain for 2015 is whether rainfall throughout the year will be enough to restore hydroelectric plant reservoir levels, which could still allow for a reduction in generation costs.
For now, simulations point to a total average adjustment (ordinary plus extraordinary) of 49.92% for 2015. It remains to be seen whether consumers' budgets will be able to withstand such tariff realism.