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LATIN AMERICAN FEATURE BALANCING TARIFFS, METERING AND INVESTMENT IS A TRICKY BUSINESS: DSOs IN BRAZIL comprises 45% of the final consumer price of electricity in Brazil and has attracted substantial controversy as the federal government moved last year to lower tariff rates”. The tariff regime for Large Power Users has been well established for the last 30 years, but residential tariff structures are still the subject of a lot of discussion and have only recently been properly defined. Distribution In an interview with Bruno Kleinau, Energy Metering Planner and Controller for Celpe (Companhia Energetica de Pernambuco), one of Brazil’s distribution companies, he tells MI: “Brazil is very dependent on hydroelectric plants, which in turn are depend on rain to keep the reservoirs at the right levels. Currently we are going through a period where the reservoirs are at their lowest levels and we are using thermal power plants, hence energy is more expensive. If the dams and reservoirs continue emptying, we will not have enough power to meet the energy demand of the population.” power companies are focussing on short- term contracts in order to maximise profits. The tariff model adopted in Brazil is a Price Cap model, whereby the tariff is determined by the regulator, based on supply contracts, depreciation of assets, return on investment and cost of operation and maintenance of networks. Currently only large power users are able to buy electricity through the free market. Technical losses The national average in terms of non- technical losses is terrible. Currently, the level is between 15% and 20%. Some technological solutions have been used, but the biggest hindrance to proper reduction actions is political and cultural issues. According to Marcio Hamerschmidt, Copel has rates close to 2% and that is considered benchmark. Celpe’s losses are around 7.84%. With prepaid metering seeing a resurgence worldwide, making use of both traditional prepaid meters and smart meters, Brazil’s prepaid metering sector has recently been boosted by the announcement that ANEEL has approved regulatory arrangements for electronic prepayment (and post – payment) of electricity. In Brazil, the only experience with prepaid metering is in the state of Amazonas. The model was implemented in six counties, serving 12 communities and totalling 211 consumer units. As a country, Brazil has more than 50 million electricity customers, of which 85% are residential consumers. The distribution sector is largely privatised (more than 60% of the sector is private) and is regulated by ANEEL, the National Electric Energy Agency, which is responsible for determining both the regulatory framework and tariffs for which electricity is sold by the distributors. Distribution concessions are based on geographic area and type of customer. According to Brazil Works, an advocacy group based in Washington, “distributors hold concession contracts that feature a tariff revision clause through which ANEEL can modify the prices paid for electricity by consumers. These modifications in tariff are adjusted periodically, usually from 3 to 5 years depending on the specific contract. In addition, ANEEL carries out an annual tariff adjustment to correct for inflation and productivity sharing. The final tariff charged by distributors to consumer units is composed from the operational costs, the costs of capital and depreciation of infrastructure and equipment, and taxes and fees. Currently, a broad set of national, state, and local taxes and fees The power sector in Brazil is facing uncertainty around a number of issues. The distribution system operators (DSOs) are being pressured for tariff reductions and ANEEL has approved regulatory arrangements for electronic prepayment of electricity 26 The resolution approved by ANEEL in April 2014 requires that all electricity distributors offer the service within five years. According to Marcos Bragatto, superintendent for the Regulation of Commercial Services of ANEEL, the concessionaires can adapt the system to the reality of their consumption area, but all must provide prepaid metering. “The five years are for distribution companies to adapt and offer the service. During this period, they can perform pilot projects and thus find the best way to provide this service”. METERING INTERNATIONAL ISSUE - 3 | 2014