Higher electricity bill in Brazil: ANEEL readjusts red flag 2 by 52%

RIO DE JANEIRO, BRAZIL – The National Electric Energy Agency (ANEEL) on Tuesday, June 29, approved a red flag 2 tariff rise. The extra charge increased the charge from R$6.24 (US$1.26) to R$9.49 per 100 kWh consumed.

The tariff flag stood at level 2 in June, the most expensive, but ANEEL decided to raise the tariff amid a crisis in hydroelectric reservoirs.

The water crisis, the result of the worst worst low water period in 91 years in power plants, has increased the use of more expensive thermoelectric plants, whose cost included in consumer tariffs is covered by “flags”.

Moreover, this value could be even higher starting in August. This is because ANEEL has decided to increase further the surcharge values. With the new readjustment, the red flag 2 will rise to around R$11.50, representing an increase of over 80% in relation to the R$6.24 currently charged.

The red flag value revision for 2021/2022 coincided with the lowest inflows in the main drainage basins of the National Interconnected System (SIN), related to hydroelectric power generation.

ANEEL’s general director André Pepitone, who announced the increase after the board’s approval, recalled during the hearing that the tariff flags account is running a deficit of approximately R$1.5 billion, advocating an increase in the value.

He said that “no one likes to announce price hikes” and emphasized that ANEEL has been working hard to reduce tariffs. But he also considered the water situation. Delaying the decision could make the scenario “very challenging,” he said.

Other flag readjustments

The agency also approved a readjustment in level 1 of the yellow and red flag. According to the proposal, the rate charged when the agency activates the yellow flag will increase 39.5%, from R$1.343 per 100 kWh to R$1.874.

The red flag 1 will drop from R$4.169 per 100 kilowatt-hours (kWh) consumed to R$3.971 – a reduction of 4.75%.

Flags system

The flag tariff system was created in 2015. In practice, the colors and categories – green, yellow or red – determine if there will be extra charges on electricity bills.

The green flag, which does not permit any increase, indicates that the cost of producing energy in the country is low.

The yellow and red flags, on the other hand, represent an increase in the cost of generation and the need to use thermal plants, which is linked mainly to the volume of reservoirs at hydroelectric plants and the rainfall forecast.