After months of negotiations, the Minister of Mines and Energy, Alexandre Silveiraand the president of Paraguay, Santiago Peña, reached an understanding on the first rules for the new agreement between the two countries on the Itaipu hydroelectric plant. A meeting in Asunción, this Tuesday (7), moved towards amending Annex C of the Itaipu Treaty, which has been under review since the end of last year. The first Itaipu Treaty had been signed 50 years ago and expired in 2023.
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There are other Annex C items to be defined. Among the new features already agreed is the possibility of selling part of the energy generated by the Paraguayan margin to the free Brazilian market. In other words, the surplus energy that until now has been sold exclusively to the Brazilian government can be sold directly to industries.
Itaipu has 14 thousand megawatts (MW) of installed power and production is divided equally between the two countries. As Paraguay does not consume everything it produces on its shores, the neighboring country sells around 35% of its quota to Brazil.
The agreements signed still depend on approval from Congress in both Brazil and Paraguay.
Another change planned for Annex C of the Itaipu Treaty and which should come into force from 2027 onwards will be a reduction in the tariff covering only the so-called operational and maintenance costs, which may vary from US$10 to US$12 per kilowatt ( kW). The processing of the proposals defined at the meeting should be completed by the end of this year.
Paraguay managed, however, to raise Itaipu’s immediate energy tariff until 2026.
This was another definition taken at this Tuesday’s meeting. Since last year, the two countries have been in an impasse over the price of the tariff. To put pressure on the Brazilian government, Peña even blocked the hydroelectric plant’s cash flow, preventing payments to suppliers, employees and outsourced workers. As Itaipu is a binational – with very particular rules for its operation – both countries must be favorable to financial transactions. In February, the Paraguayan government released the cash and set a deadline for definitions to be made.
Now, the Brazilian and Paraguayan governments have defined that the Unitary Cost of Electricity Services (Cuse), currently in force at US$16.71, goes to US$19.28 per kW, an increase of 15.4%. The Brazilian government spoke a lot about not giving in to Paraguayan pressure and defended the reduction of values - echoing the promises renewed over the last five decades by the national public authorities. The argument was based on the end of the debt contracted to build the hydroelectric plant, in February last year.
According to the adjustment defined this Tuesday, the value will be in force until 2026 and should impact US$300 million on electricity bills in the South, Southeast and Central-West regions from Brazil. Interlocutors linked to the binational state that this amount will be amortized by the plant itself, which promises to return the resource in the form of a financial contribution to the Empresa Brasileira de Participações em Energia Nuclear e Binacional (ENBPar), with the aim of neutralizing the effect of the increase on consumers. It is up to the state-owned ENBPar, to which Itaipu’s energy is sold, to pass on the energy costs to the distributors.
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