SAO PAULO, March 6 Electricity costs for
companies and individuals in Brazil are likely to further
increase in the second half of the year due to insufficient
water in hydroelectric plants' reservoirs after below average
rains, power sector experts said on Monday.
Brazil's power trading chamber (CCEE) projects summer rains
to reach only around 70 percent of normal levels Brazil-wide, a
situation that could lead to an increase on costlier thermal
power generation in the second semester.
CCEE's projections have already forced the government to
pass on to consumers tariff hikes this month. That could happen
again later in the year, the experts said in interviews.
"We will probably have a red flag adopted during one or more
months late this year," Erik Azevedo, a partner at power trading
company FDR Energia, said.
Under the country's system to advise consumers about changes
in tariffs, power distributors issue green, yellow or red flags
to indicate favorable to costly conditions for electricity
Until March consumers were billed under a green flag, with
no additional charges. But a yellow flag was instated this month
adding 2 reais (64 cents) per 100 kilowatt hour (kwh) to bills.
If a red flag is applied, consumers will be charged 3 additional
reais per 100 kwh.
A red flag has not appeared in Brazil power bills since
February last year.
"We have seen a wet period below normal. It is still
premature to talk about a red flag, but it could happen," Carlos
Caminada, a risk manager at power trading firm Ecom Energia,
Another factor to watch is the economic recovery, the
experts said. If demand picks up quicker than expected, the
likelihood of a red flag increases.
Brazil is emerging from two years of power consumption
contractions, following the worst recession in generations.
(Reporting by Luciano Costa; Writing by Marcelo Teixeira;
Editing by Richard Chang)