UPDATE 1-Brazil spending on power generation may stretch budget

viernes 7 de febrero de 2014 15:19 GYT

By Alonso Soto

BRASILIA Feb 7 (Reuters) - Brazil's fiscal accounts, already under close scrutiny by rating agencies, could suffer a new blow this year as the government picks up the bill for rising energy prices.

A blackout in large swathes of the country this week raised serious questions about the capacity of the power system to cope with rising consumption and a drop in supply as low water reservoir levels sap output at hydroelectric plants.

To avoid an embarrassment during the upcoming soccer World Cup and a new spike in inflation, President Dilma Rousseff has vowed to take on the cost of using gas-and-fuel-powered plants to guarantee supply.

Finance Minister Guido Mantega acknowledged on Wednesday the government may have to use more than the 9 billion reais ($3.78 billion) it budgeted to pay for energy costs this year. Most of that amount would be loaned to power distributors to pay for more expensive thermal energy.

In the worse-case scenario that rains stop completely, the government calculates it would have to pay 18 billion reais to keep all thermal plants operating all year long, said a government source directly involved in energy policy discussions.

"That's a very unlikely scenario because it will rain again at some point," said the official who asked not to be named in order to speak freely. "We are still calculating the extra cash that the sector would need. There are many variables involved, including rain levels."

Local media has reported that the government could hand out up to 5 billion reais in extra cash to guarantee power supply in 2014. Last year the energy bill for the government was nearly 10 billion reais.   Continuación...