(Adds context and regulator’s comment, paragraphs 3-)
BRASILIA, Jan 12 (Reuters) - Special rate increases for some Brazilian electricity distributors are inevitable in the face of higher power costs from the Itaipu dam and expected increases in subsidies for system expansion and poor consumers, the head of Brazil’s electricity regulator said on Monday.
Romeu Rufino, director general of the regulator, known as Aneel, said the additional subsidies will have to be made up by rate increases for consumers because the Treasury has no plans to put money in the CDE electricity subsidy and expansion fund in 2015 despite a Congressional plan to provide it with 9 billion reais ($3.37 billion) in its 2015 budget.
Rufino did not say how big the rate increases would be. Normally, utilities only get rate adjustments once a year, but a 46 percent increase in the cost of power from Brazil and Paraguay’s Itaipu dam and the need for the subsidies, justifies special rate increases, Rufino said.
“I‘m unable to make this estimate yet, but what ever is necessary in terms of a special adjustment will be made,” Rufino told reporters after meeting with Brazilian President Dilma Rousseff and Mines and Energy Minister Eduardo Braga.
Itaipu, the world’s second-biggest hydrodam by maximum capacity, provides more than 17 percent of Brazil’s electricity.
Any increase in the CDE subsidy will be aimed at reorganizing costs in the electricity industry in order to secure a 2.5 billion real ($953 million) emergency loan for the sector.
Without such a government brokered bailout, and the 17.8 billion reais ($6.66 billion) of emergency credits arranged last year, many utilities would go bankruptcy. Without the loans many would be unable to pay soaring electricity costs caused by Brazil’s worst drought in at least 80 years and the government’s failure to auction sufficient new generation capacity rights to meet rising demand at lower prices.
Reuters reported on Friday that Brazil’s state-owned development bank BNDES is willing to make the emergency loan as long as fellow state-run lenders Caixa Economica Federal and Banco do Brasil SA join the operation.
Any attempts to reduce the cost of the CDE would not be made by cutting subsidies to low income power consumers, subsidies for coal-fired power or spending on extending the electricity grid to unserved regions, Braga, the energy minister said.
$1 = 2.6733 Brazilian reais Reporting by Leo Goy; Writing by Jeb Blount in Rio de Janiero; Editing by Leslie Adler and Grant McCool