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Having passed the crucial stage of Eletrobras’s privatization, which was approved by the Federal Court of Accounts (TCU), Mines and Energy Minister Adolfo Sachsida will now negotiate a proposal to reduce electricity bills, which is under negotiation with Congress, and debate the use of public money for gas pipelines. The minister did not reply to a request for comment.
Both themes are seen as key by President Jair Bolsonaro’s allies. Regarding the increase in electricity tariffs, that exceeded 20%, the concern is with the negative impact of inflation on the popularity of the president and allies in search of reelection in regional elections.
Mr. Sachsida has already begun to point out alternative paths that would lead to the reduction of tariffs, which could become a package of measures if it adds other proposals from Congress. He is also trying to avoid other legislative proposals that concern the government, such as the one that imposed on the sector the construction of 8-gigawatt gas-fired thermal plants in regions where there are no gas pipelines.
The reduction in electricity bills meets the wishes of President Jair Bolsonaro, who is concerned with eliminating risks to his reelection. The skyrocketing cost of electricity, added to the cost of fuel, increases inflationary pressure and affects his popularity.
In a meeting with Chamber of Deputies Speaker Arthur Lira (Progressive Party, PP, of Alagoas), Mr. Sachsida signaled that he will use funds from the privatization of Eletrobras to neutralize part of the tariff increase. The operation itself already guarantees the transfer of R$5 billion this year to the Power Development Account (CDE).
When approving the 2022 CDE budget, in the amount of R$32 billion, the Brazilian Electricity Regulatory Agency (Aneel) considered the contribution of R$5 billion that already make up the calculation of the distributors’ adjustments. It remains to be seen whether the minister, when making the promise to Mr. Lira, will look for a way to bring forward the transfers that the “new” privatized Eletrobras will make to the CDE over 25 years. In all, the privatization will yield a total of R$32 billion to CDE.
Another way to bring more funds from Eletrobras’s capital increase to CDE this year is to convince the National Treasury Secretariat to give up part of the R$25.4 billion that will be received as fixed concession payment for changing the contractual regime of the plants. This would require more than good will from the economic team, since it would imply breaching the spending cap rule, which limits growth in public spending to the previous year’s inflation.
In recent days, the proposal to limit sales tax ICMS rate charged on electricity bills to 17% has gained strength, which would also be applied to other essential services. On Thursday, the Chamber speaker assured that the bill that deals with the issue will be put on the agenda next Tuesday.
The Brazilian Association of Power Distributors (Abradee) estimates that limiting the ICMS charged on electricity bills to 17% provides a 15% reduction in tariffs. The calculation was based on a ruling by the Federal Supreme Court, in December last year, which had already limited the state tax on power to 17%, also considering the essential nature of the service. Abradee estimates that the average rate charged to consumers is around 27% and believes that the state lacks goodwill in enforcing the Court’s decision.
More recently, on the initiative of Senator Fabio Garcia (União Brasil of Mato Grosso do Sul), Aneel came under pressure to speed up the use of tax credits related to the exclusion of ICMS from the calculation basis of PIS/Cofins. According to the senator, Aneel allows access to only 20% of what is made available.
The tax credit, estimated at R$60.2 billion, was also generated by Federal Supreme Court’s ruling. Of this total, R$48.3 billion, which has been declared final and unappealable, have already been qualified by the Federal Revenue. However, only R$12.7 billion were considered in the adjustments, causing tariffs to fall 5%.
Source: Valor International