Brazil

Government will reduce electricity bill with end of thermal contracts

O Ministry of Mines and Energy (MME) expects to save almost R$ 40 billion with the termination of contracts for thermal plants. The measure is still expected to reduce tariffs in the country by up to 4.5% over the next three years.

The decision was announced on Thursday 27 by the ministry, which opened a public consultation on the termination of contracts.

The plants were contracted in October last year, through a process called the Simplified Competitive Procedure (PCS), and were supposed to operate from May this year to December 2025.

As the auction took place at the time of the water crisis, the price of energy within the PCS was R$ 1,500 megawatt-hours (MWh). Today, with the hydroelectric reservoirs full, the market works with a spot price of R$ 55.70 per MWh.

All 17 PCS thermal plants would cost approximately R$ 40 billion in the electricity bill, according to estimates by the Brazilian Association of Large Energy Consumers and Free Consumers.

According to the government, the proposal will reduce electricity generation costs, preserve energy supply and respect PCS rules.

The draft ordinance presented in the consultation authorizes the National Electric Energy Agency (Aneel) to terminate the contracts of plants that came into operation on time and that are in compliance with their obligations without any cost to companies or the government.

According to the MME’s proposal, non-defaulting generators who agree to amicable termination will have 30 days, after the publication of the directives ordinance, to present the acceptance term to Aneel.

“The solution submitted to society seeks to meet the public interest, insofar as it provides an opportunity to reduce costs and electricity tariffs, respecting the contracts signed and preserving the legal and regulatory certainty of the bidding process”, highlighted the ministry.

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