Electricity bills are cheaper from today with the end of the water scarcity tariff flag

Electricity bills will become cheaper as of this Saturday (16th) across the country with the adoption of the green tariff flag, which does not charge an extra fee for electricity consumption. The government estimates that the electricity bill will be about 20% cheaper with the change from the most severe tariff flag (water shortage) to the least restrictive (green).

In addition, Aneel (National Electric Energy Agency) says that there is a high probability that the green flag will remain in force until the end of the year, as studies by the ONS (National Electric System Operator) indicate that there is no need for additional charges in the electricity bill in 97% of scenarios projected for 2022.

The change of flag was possible due to the heavy rains that have been occurring since October and have recovered the level of the hydroelectric power plants’ reservoirs. Since September, the flag in force was that of water scarcity, which increased the cost by R$ 14.20 for every 100 kilowatt-hours (kWh) consumed.

It was created in 2021 because Brazil went through the biggest water crisis in almost a century, which dried up the reservoirs and forced the activation of thermoelectric plants, which produce more expensive energy (and therefore demand extra charges).

The water scarcity flag is above the red flag level 2, which was in force between June and August of last year and was until then the most critical extra charge of the tariff flag system adopted by Aneel.

What are tariff flags?

Aneel has adopted the flag system in the electricity bill since 2015, as a way of balancing the costs of electricity production. The flags indicate whether conditions are favorable for energy generation (green flag) or if there are additional costs (yellow flag, red levels 1 and 2 and water scarcity).

In all banners, except the green one, there is an additional charge for every 100 kilowatt-hours consumed (kWh) on the electricity bill of individual consumers and small businesses. Consumers who are in the free energy market do not participate in the flag system.

The additional charges are intended to signal to the consumer that the cost of generating electricity is more expensive in the country, curb consumption and also mitigate the impact on the budget of distributors. Until then, companies were required to bear the costs, which were only passed on to the electricity bills in the annual tariff readjustment.

The system was suspended between May and November 2020, as a way of relieving consumers’ pocketbooks during the first wave of the new coronavirus pandemic, but in December 2020 the red flag level 2 was adopted (a “pedal” by the government to anticipate 2021 inflation).

Between January and April 2021, the flag was reduced to yellow. But, given the persistence of the lack of rain, Aneel had to adopt the red flag level 1 in May and the red flag level 2 in June, in addition to creating and implementing the water scarcity flag as of September.

Aneel proposes readjustment in flags

Despite the good news this Saturday, the board of Aneel proposed on Tuesday (12) to increase the values ​​of tariff flags by up to 57%.

According to the proposal, the value of the yellow tariff flag will increase by 56%, from BRL 1,874 for every 100 kWh consumed to BRL 2,927, and red flag 1 will increase by 57%, from BRL 3,971 to BRL 6,237. The readjustments would imply in a residential electricity bill about 5% to 10% more expensive, respectively, when triggered.

Red flag 2 will have a slight reduction of 1.70%, from R$9,492 per 100 kWh to 9,330. Even so, the value represents an increase of 15% compared to the average residential tariff in force in the green flag.

The new values ​​should be valid for 2022 and 2023, but the proposal may still undergo changes during the public consultation, which started on Thursday (14) and runs until May 4.

According to the rapporteur of the case at Aneel, Sandoval Feitosa, the proposed increases are mainly motivated by the increase in fuel costs and inflation measured by the IPCA, in addition to the inclusion in the historical series of data from last year, when the country faced the worst water crisis in 91 years.

Feitosa listed the inflation adjustment, which ended 2021 with a rise of 10.06%, the significant increase in energy generation costs, due to the high cost of fuel (which practically doubled last year), and the hiring of thermal plants as reserve energy in an auction in December.

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