Electricity: why is the electricity bill so expensive in Brazil?

Already approved in the Senate, the bill known as the “Fuels of the Future” project (PL 528/2020) returns to the Chamber of Deputies with significant changes. Among the inclusions in the text made by the senators, there is a “jabuti” (when the section is extraneous to the text of the matter), which increases exemptions for microgeneration and minigeneration of electric energy, serving, above all, the solar energy sector. Under the terms of the new wording, the benefit increases from 12 to 30 months.

The president of National Front of Energy ConsumersLuiz Eduardo Barata, estimates that this measure could have an impact of over R$40 billion on consumers’ pockets, even having an impact on inflation.

“The high cost of energy has really affected the pockets of millions of energy consumers in the country who, every month, have to evaluate whether they will pay their electricity bill or buy the goods they need. Obviously, in addition to weighing on the citizen’s pocket when they pay their bill, it also impacts when they buy products and hire services. Energy, increasingly essential, certainly contributes to inflation, affecting the country’s economy,” he says.

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The measure is already included in the distributed generation framework, approved in 2022, which granted a 12-month period, after approval by the distributors, for these companies to complete their projects, maintaining the exemption from tariffs for the use of the distribution network. However, this amendment allows those who missed the deadline to have up to 30 months to make their respective works viable without losing the subsidy.

Another entity that spoke out was the Brazilian Association of Large Energy Consumers and Free Consumers (Hug). According to the association, the measure concerns an increase of approximately 15% in the subsidies currently granted to distributed generation, which in 2023 reached R$40.3 billion, which burdens 13.5% of the tariff of residential consumers who do not have distributed generation. “In other words, lower-income consumers, who cannot install distributed generation, are financing those who have money to invest in this type of generation,” says the association in a note.

What makes the electricity bill more expensive?

According to the National Electric Energy Agency (ANEEL)Brazilians must pay more than R$37 billion in subsidies on their electricity bills in 2024. The amounts are earmarked for the Energy Development Account, created to encourage public policies in the energy sector.

In 2023, the impact of subsidies on the energy tariff for residential consumers was 13.21%. The subsidies that consumed the largest volume of resources last year were:

• Fuel Consumption Account (CCC): R$ 11.3 billion
• Incentivized source: R$ 10.5 billion
• Distributed Generation: R$ 7.1 billion
• Social tariff: R$ 5.8 billion

In addition to these, there are also subsidies for coal; irrigation and aquaculture; small-scale distribution; rural; and water, sewage and sanitation. The information can be found at Subsidiometer from ANEEL.

Another factor that contributes to the increase in the value of the energy bill is losses due to theft or fraud. According to ANEEL, in 2023, R$6.2 billion was charged in consumer tariffs to compensate for losses caused by the famous practice of “gato”. The amount passed on to consumers due to technical losses, caused by problems or obsolescence in equipment, for example, was R$12.4 billion.

According to a study by the National Confederation of Industry (CNI), based on data from ANEEL, charges added to taxes represent 44.1% of the value of the electricity bill. According to the survey, the cyclical costs (composed of the Covid Bill and Water Shortage) and structural costs totaled, in 2023, R$ 102.35 billion.

Regarding structural costs, the highlight is the Energy Development Account. Created in 2002, the so-called CDE impacted the electricity bill by R$40.1 billion in 2023. This is a sectoral fund with the aim of financing public policies in the Brazilian electricity sector, including subsidies for incentivized energy sources, coal and distributed generation.

Impacts on inflation

Data released by the National Confederation of Municipalities (CNM)based on information from the Brazilian Institute of Geography and Statistics (IBGE), show that the increase in energy tariffs contributed to the rise in the Broad National Consumer Price Index (IPCA) in July. As a result, the electricity bill was 4.17% higher that month.

The total increase in the IPCA in July was 0.62% and the electricity tariff accounted for 0.16 percentage points of the increase. The increase was mainly influenced by the metropolitan regions of Curitiba (PR), with an increase of 11.40%; and São Paulo (SP), with an increase of 11.11%.

In August 2024, electricity was the item that contributed most to the drop in official inflation – 0.02% – with a price reduction of 2.77%. The data is from IPCA and were released this Tuesday (10), by IBGE.