EDP advises consumers on the adoption of tariff flags model
The calculation of a monthly electricity tariff value takes into account the cost of electricity generation that month
EDP, Espírito Santo energy distributor, wants to provide guidance for its clients on the tariff flags model, which came into effect on January 1st, 2015. From then on, Brazilian consumers" electricity bills will be priced in a different manner.
With the adoption of the new system, determined by the National Electricity Agency (Aneel), invoices will indicate the generation cost of the electricity for the invoiced period. In the case that this cost is above the normal, the tariff will increase. The increased sum, however, is not classified as an extra fee.
Before the measure took effect, in order to determine the annual tariffs" readjustment index of distributors, Aneel considered took expenses involved in electricity purchasing into account. The cost of generating power was then passed on to the consumers by the distributors annually, on one occasion. With the introduction of tariff flags, this cost will be passed on every month, depending on the need.
The new billing model also allows for better monthly management of consumers" consumption, as the flag tariff is disclosed for each calendar month, so the consumer can use the electricity with the cost of the tariff in mind, which varies according to the cost of generating the power. It is, therefore, important to stay tuned for the disclosure of the tariff flag that will be used next month on Aneel website. Aneel (www.aneel.gov.br).
Tariff flags" rules
The tariff flags will be either be green, yellow or red, each representing a different tariff to be paid by the consumer. The green flag means that generation conditions are normal. The yellow flag indicates that the generation costs are on the rise due to hydrological difficulties. The red flag indicates that the cost of producing electricity to meet consumer demand is high, because of the need to increase thermoelectric power generation.
Green Flag: normal conditions for power generation . The invoice will not be increased;
Yellow flag: conditions for hydroelectric generation are less favorable. The tariff increases R\$ 2.50 for each 100 kWh consumed;
Red flag: Unfavorable hydroelectric conditions, power plants (with a higher cost of producing power) must operate for more time. In this case, the tariff is increased by R\$ 5.50 per 100 kWh consumed;
The tariff flag - green, yellow or red – will be announced each month by Aneel, based on information provided by the National System Operator (NSO). Each flag will apply for the month following its announcement.
After the implementation of the tariff flags, distributors will be sure to outline in the consumer invoice the relevant flag (green, yellow or red) for the billing period, as well as the value of the tariff (R\$/kWh) of the respective flag in relation to the power consumption registered that month.
Power generation
Electricity in Brazil is predominantly produced by hydroelectric dams. In order to function, these plants depend on rainfall and the reservoir water level. When rainfall is scarce, there is less water stored in the reservoirs, and it may become necessary to activate thermoelectric power plants to ensure the supply of electricity. The cost of generation increases as a result because these plants work using natural gas, coal, fuel and diesel. When there is an adequate level of water in the reservoirs, thermal plants tend be used far less.
