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The free energy Brazilian market dilemma

Rafael Herzberg's picture
Consultant energy affairs Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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The free energy Brazilian market dilemma

In more advanced markets, free energy contracts are standardized because they mirror a "commodity".

"Wire" and "energy" are the two components of the electric bill. The wire is always regulated. Both for the regulated and for the free.

What changes is the energy. For regulated, tariffs are established by the regulatory body. For the free, the market sets the prices.

In Brazil, the methodology used to allocate regulated and free costs brings important uncertainties. They cover a list of subsidies, how to deal with the power theft, the "loans" granted to electric distributors (utilities) to mitigate the effect of the water crisis and the list goes on.

Despite the detailed regulation of the Brazilian electricity sector, there is little certainty about what the future will be like with respect to prices, tariffs and conditions.

Meanwhile, those with responsibility for corporate decisions need to include a much greater margin of safety than in well organized countries.

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