Guedes fears inflation, diverges from Bento and tries to dilute the increase in the electricity bill in six months – 08/27/2021 – Market

Concerned about the impact of the cost of energy on inflation, the Minister of Economy, Paulo Guedes, pressured the government to make the new tariff flag (red 2) worth R$ 14 and be valid for up to seven months.

The expectation was that the readjustment was approved this Friday (27), but Aneel (National Electric Energy Agency) only decided to keep the current flag for September without defining the new values.

In this way, the additional amount that falls on the bills would go from the current R$9.49 per 100 kWh to around R$14 — an increase of approximately 50%.

The proposal was made and, according to Guedes advisers, forwarded to Aneel, which has the final word on the readjustment.

Minister Bento Albuquerque (Mines and Energy) defends a greater transfer of costs to the flag. He wanted red flag 2 to remain in effect for R$24, which would give a 152% readjustment.

Representatives from distributors, consumer associations and market analysts estimated that red flag 2 would have to double in value in September to cover rising energy generation costs.

If Aneel (National Electric Energy Agency) adopts this measure, the electricity bill will undergo an average readjustment of 15.2%.

With the biggest water crisis in the last 91 years, hydroelectric plants lost space in the supply, while the government was forced to activate thermal plants — the most expensive source, the cost of which is passed on to the consumer.

The flags —green, yellow and red— appear on the electricity bill and serve to indicate the need to reduce consumption. Otherwise, the customer pays more.

Guedes’ proposal won the most support on the Planalto, where President Jair Bolsonaro issued a rule that ministers can no longer “give bad news”.

By this rule, Bento Albuquerque, who manages one of the worst crises in history, cannot talk about rationing, nor promote very sudden adjustments.

Planalto Palace advisers believe that the adoption of rationing at the time would further harm Jair Bolsonaro in his campaign for reelection. The president sees his popularity plummet in the face of measures against the pandemic and the degradation of the economic scenario.

This logic was what led Aneel to share the transfer of the last increase in the tariff flag, which occurred at the end of June, giving a 52% increase (going to R$ 9.49 per 100 kWh), and leaving the difference — about R$3 billion—for another opportunity.

The price of energy was the one that weighed the most on the IPCA and the trend is up in light of the worsening of the crisis. In the last 12 months up to August, the IPCA-15 reached 9.3% — and one of the biggest impacts was that of electricity, which rose 5% in the month, according to the IBGE.

When consulted, the Ministry of Economy declined to comment. The Ministry of Mines and Energy did not respond until this report was published.