Coronavirus isolation causes energy consumption to drop and creates new challenge for the electricity sector – 03/25/2020 – Market

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The drop in energy consumption after the social isolation measures may lead the sector to have to deal again with the problem of distributors’ contractual surpluses, a situation similar to the one that culminated in a billion dollar loan charged on the electricity bill between 2014 and 2019.

According to the CCEE (Electric Energy Trading Chamber), electricity consumption already shows strong reflexes of social isolation. On Monday (23), it fell 18% both at 9 am, when energy consumption generally grows, and at 2 pm, when peak demand occurs.

“The increase in residential consumption [com o isolamento] it will not compensate for the drop in demand from industry and commerce “, says Lavínia Hollanda, partner at consultancy Escopo Energia.

The first effects are already beginning to be felt in the free energy market, an environment where distributors and generators close bilateral supply contracts and which represents about 30% of energy consumption in the country.

According to the Reuters agency, distributor Cemig a and trader Voltener, of Votorantim, announced that they can declare force majeure in contracts. This clause allows companies to reduce their purchases in cases of events beyond control.

But the distributors also buy energy at government auctions, under long-term contracts, based on future demand projections. If they are unable to sell all the contracted energy and there is no demand for leftovers in the free market, they bear the loss.

In 2014, the fall in economic activity created this type of problem. Without revenue to honor their commitments, the distributors were helped by three loans mediated by CCEE, in the total amount of R $ 21.2 billion.

The installments were transferred to the electricity bill for a period of five years. In September 2019, after negotiation between the government and creditors, the remaining installments were paid in advance, with an average reduction of 3.62% in the electricity bill.

At a meeting on Tuesday (14), the director-general of Aneel (National Electric Energy Agency), André Pepitone, said that the regulator is aware of the problem and will discuss a solution for the sector.

For lawyer José Henrique Berman, partner at BMA Advogados, the novelty of the situation must demand legislative solutions to define how the losses will be shared in the sector, which may undergo a structural change in the consumption profile.

Hollanda argues that eventual emergency solutions do not represent new increases in the electricity bill. “Nobody wants to burden the consumer any more. Neither the distributors nor the government.”





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