Explaining to the consumer the rise of electric energy tariff

1. Seminário Regulação, Infraestrutura e o Futuro do PaísFGV, 31 julho 2014Jerson KelmanCOPPE-UFRJjerson@kelman.com.br

2. Explaining to the consumer the rise of electric energy tariff

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

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

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

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

7. Hydrological uncertainty

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

10. New power plants are built if their proponents win Government organized auctions of PPAs Energy producer 1 Disco 1 Disco 2 Energy producer2 ... ... Energy Producerm Disco n

11. 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

12. 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?