Seminário Regulação, Infraestrutura e o Futuro do País FGV, 31 julho 2014 Jerson Kelman COPPE-UFRJ

Explaining to the consumer the rise of electric energy tariff

Tariff calculation is based on the “required revenue” of the discos Non manageable costs (Parcel A): Pass through Energy Taxes Transmission system Manageable costs (Parcel B): Subject to the regulator O&M Depreciation Remuneration of the capital + – 64 distribution companies

Parcel A Pass trough Parcel B Regulated Present situation (2014)

The dispatcher ranks the generators by unit price 5 In countries that get electricity from coal or oil, power dispatch is done “locally” and is conceptually a simple matter

6 Future Today Time In countries that most of the electricity is generated by hydro plants, hydrological uncertainty is a relevant issue Future water storage depends on present storage, future water inflow and the decision about how much thermoelectricity could be substituted by hydroelectricity

Hydrological uncertainty

Reliability Energy buyers (distribution companies & free consumers): 100% of the energy consumption should be contracted through PPAs Energy sellers (generators) ∑ PPAs < calculated firm energy

Energy producer 1 Energy producer 2 Energy Producer m Disco 1 Disco 2 Disco n New power plants are built if their proponents win Government organized auctions of PPAs

Centralized dispatch In order to take advantage of hydrological diversity, energy is transported through long distances Hydropower plants in the same river basin are own by different companies Hydropower plants share the joint production proportionally to the firm energies In order to take advantage of hydrological diversity, energy is transported through long distances Hydropower plants in the same river basin are own by different companies Hydropower plants share the joint production proportionally to the firm energies

Three contemporary regulatory problems How to incentive the existing hydropower plants to be transparent, innovative and efficient? Regulatory activism X Regulatory stability How to allocate the energy theft and delinquency cost between the Discos and the honest consumers?