March 14, 2025

What Are the Criteria and Assumptions Behind Light's Tariff Deferral?

The saga of the positive deferral — or, put another way, Rio de Janeiro consumers' loan to Light — gained a new chapter at the National Electric Energy Agency's (ANEEL) most recent board meeting, on March 11, 2025. At that meeting, the board was divided over Light's request to defer the tariff reduction that, per the regulator's calculations, would produce an average effect of about -12% in 2025.

Drawing on the deferral ANEEL authorized for Copel-DIS last year, the distribution company argued that, over the next two years, significant tariff increases could occur, resulting in volatility undesirable to consumers. It therefore asked the agency to authorize a BRL 1.6 billion loan from consumers (the total amount at stake in the tariff proceeding), which would serve as a "cushion" to soften possible future cost increases.

The board's split was over how much to defer, not over the deferral itself. The argument presented was that, since there's uncertainty in the tariff projection underlying the proposal, fully deferring the adjustment could, in the coming years, cause even greater volatility for consumers than initially indicated in the studies carried out by ANEEL's technical staff. These uncertainties are tied, for example, to possible effects from ongoing lawsuits before the Federal Supreme Court (STF) on the constitutionality of returning PIS and COFINS credits.

To minimize possible risks in case of a mistaken deferral due to an off-target tariff forecast, director Ludimila Lima da Silva argued for partially granting Light's request, deferring BRL 850 million positively, which would result in an average effect of -5.76% in 2025 on the Rio de Janeiro distribution company's tariffs.

Tariff projections need to be carefully assessed in this context. After all, if a projection can change a tariff-repositioning event, its impartiality must be beyond question, or risk challenges to the integrity and fairness of the deferrals granted.

In both concrete cases in question — Copel-DIS and Light —, the distribution companies presented their positive-deferral requests based on their own expectations of future costs for providing distribution services.

Since a tariff projection is always based on expectations, it's important that the scenarios used be validated by the regulator, with due transparency and technical consistency. After all, a projection's quality is directly tied to that of the assumptions used.

The uncertainties in the parameters considered in the study also deserve attention. After all, we can't expect a static projection, built with just one scenario, to be able to capture such future uncertainties.

The fact is that, in both the Copel-DIS and Light cases, the decisions guiding discussions over positive deferral are based on tariff trajectories set by the concessionaires themselves.

In this sense, the relevance of the concern raised by director Ludimila da Silva is beyond question, given the risk tied to a deferral at the cost of giving up a concrete, immediate consumer benefit that, depending on the tariff trajectory that actually plays out in the near future, could result in even greater tariff volatility than expected for 2025.

In today's macroeconomic context, building tariff scenarios has become an essential practice for dealing with the uncertainty inherent to calculation parameters. Energy-price volatility, regulatory changes, and shifts in macroeconomic indicators are just some of the factors that can significantly affect tariffs.

Building these scenarios lets companies and power-sector managers anticipate possible variations and prepare for different market conditions. Running multiple simulations helps identify potential risks and opportunities, and develop more robust strategies to mitigate adverse impacts. Analyzing these scenarios thus helps in understanding tariff dispersion and making better-informed, more assertive decisions.

To give an idea of this complexity, as an exercise in mapping uncertainty ranges in tariff projections for Light, TR Soluções quantified more than 2,000 projection alternatives. Beyond the more than 140 calculation parameters factored into its base scenario, the company considered three tax-credit reversal scenarios, three hydrology scenarios (behavior of the Settlement Price of Differences (PLD), Marginal Operating Cost (CMO), Stored Energy (EAR), and hydrological risk), and three possibilities for each of the main macroeconomic indicators (IPCA; IGP-M; Selic; exchange rate; and GDP) — central value, upper bound, and lower bound —, whose combination results in the total number of scenarios mentioned. How these parameters evolve over the coming years should guide the trajectory of Light's residential application tariff, as shown in the figure below.

Source: TR Soluções' SETE platform

In TR Soluções' base scenario, whose results are shown as red dots in the figure, after a 12% reduction in 2025, there would be a further 4% drop in 2026 and a 7% increase in 2027. It's also possible to see that, across the more than 2,000 scenarios considered, the projections trend downward in 2025, 2026, and 2027 relative to 2024 tariff figures.

In a universe of scenarios like this one, where successive tariff drops make up a possible set of expected tariff repositioning, it seems to make little sense for there to be a positive tariff deferral for Light in 2025.

The fact is that, amid the uncertainty and the diversity of possible tariff trajectories, the regulatory decision on positive deferral must be made based on solid technical criteria and careful validation of the assumptions used. Transparency and impartiality in building these projections are essential to ensuring consumers aren't burdened by a measure that, instead of avoiding volatility, could worsen it in subsequent years.

Deferral as a practice could inaugurate "a new era for the agency," as director-general Sandoval Feitosa praised at the board's most recent meeting. But that can't come at the expense of the technical foundations that have always guided its work: the regulatory body must ensure decisions of this magnitude are anchored in solid grounds and full transparency, protecting the balance between distribution companies' financial sustainability and tariff fairness for consumers.

* Paulo Steele is managing partner and Helder Sousa is Director of Regulation at TR Soluções.