August 25, 2017 / 7:40 PM / a year ago

UPDATE 1-Brazil minister says Eletrobras privatization will not lift rates

(Adds quotes, details)

RIO DE JANEIRO, Aug 25 (Reuters) - The Brazilian government’s plan to privatize power holding company Centrais Eletricas Brasileiras SA will not lead to an increase in electricity prices, Mining and Energy Minister Fernando Coelho Filho said on Friday.

In an interview with Reuters, the minister said a change in the quota system regulating generation at some of the company’s hydropower dams will take place over five or six years, avoiding the abrupt rate hikes forecast by regulator Aneel on Wednesday.

“It is not true that there will be an increase in energy prices due to the Eletrobras process,” said the minister. “The proposed end for the quotas will be made over five, six years ... It wouldn’t happen all at once,” he added.

The state-owned company has 14 hydroelectric plants that operate under the so-called quota system under which electricity is sold to distributors at low prices that only cover operating and maintenance costs. The system was implemented in 2013 by the government as a measure to cut power prices for consumers.

The idea included in the new plan for Eletrobras is to allow the sale of electricity at market prices, changing the contracts and the operation terms. Eletrobras would have to pay signature bonuses on those new contracts to the government.

The change to the quota system is expected to happen at the same time as the plan to privatize Eletrobras.

The Mining and Energy Ministry has said that both operations could result in net revenue of around 20 billion reais ($6.34 billion) for the government, money that could help the administration cut its fiscal deficit. ($1 = 3.1558 Brazilian reais) (Reporting by Rodrigo Viga Gaier; Writing by Alexandra Alper; Editing by James Dalgleish)

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