January 25, 2018

Expected Pass-Through of the CCRBT Balance to 2018 Tariffs

Always aiming to keep SETE users aware of any significant tariff impacts, and to be as transparent as possible about the improvements and updates made available in the application, TR Soluções prepared this document to clarify the treatment previously used, and the one adopted starting with SETE's latest update (version 12.44), regarding how the Tariff Flag Centralizing Account's (CCRBT) balance is factored into 2018 tariff events.

The previous SETE version (12.43) didn't factor the CCRBT balance into tariff calculations for projections beyond a two-month horizon. Given that the CCRBT's most recent accounting is from November 2017, with a deficit ANEEL calculated at about BRL 5 billion, and that no significant reversal of this deficit status quo is expected in the first few months after November, we can expect that, in 2018 tariff events, especially those happening early in the year, the balance resulting from costs the CCRBT is responsible for, but that weren't settled due to insufficient revenue, will be passed on to tariffs.

Figure 1 – Tariff Flags - Revenue vs. Cost Comparison - 2016 and 2017 (source: ANEEL)

As soon as the CCRBT started showing significant deficits (October 2017, referring to August's accounting), TR Soluções began developing a tool that will be able to project the CCRBT's balance, which should be made available to all SETE users soon. However, while that tool isn't yet implemented, TR decided to factor the deficits from November 2017's CCRBT accounting into its standard projections. This decision stems from the significant impact factoring in this balance has on electricity distribution concessionaires' tariffs.

In the new SETE version, which went live on January 25, 2018, users saw a significant increase in most distribution companies' Application Tariff. The CCRBT balance corresponding to the sum of monthly figures, from the month following the last month factored into each distribution company's 2017 tariff event through November 2017, now becomes part of distribution companies' financial costs, shown under Other Financial Components.

Table 1 shows the additional amounts recorded under Other Financial Components for each distribution company, as well as their equivalent value in BRL/MWh. Also shown, in the "number of months considered" column, is the number of months used to quantify the CCRBT balance in 2018 tariff events.

Table 1 - Result of Factoring the CCRBT Balance Into 2018 Tariffs.

It's important to stress that this is the current expectation, based on November 2017's CCRBT accounting. The more months factored in (the "number of months considered" column), the lower the uncertainty regarding the balance to be passed on to 2018's tariff. The fewer months factored in, the higher the uncertainty, since the CCRBT's balance changes every month, depending on the expenses and revenue making up the account.