Brazil closes agreement with Paraguay and will give up US$300 million per year to maintain current Itaipu tariffs | Economy

The Brazilian government reached an agreement this Tuesday (7) with Paraguay to maintain tariffs at the Itaipu plant at current levels, without an increase for consumers in the South, Southeast and Center-West.

It was agreed that Brazil will maintain the service tariff at US$ 16.71 per kilowatt-month (KW month), while Paraguay will increase it to US$ 19.28 per KW month. These levels should be valid until 2026.

As this tariff is defined by both countries, in practice, Brazil will give up US$300 million per year to keep tariffs on the Brazilian side below what was defined by Paraguay.

“Paraguay will allocate this difference in the way that suits it and Brazil decided to use this difference to reduce tariffs. We will use this difference from US$ 19.28 to US$ 16.71 to keep the Brazilian people’s tariffs unchanged “, declared the Minister of Mines and Energy, Alexandre Silveira.

The money will come from Itaipu’s investment account and will be sent to the state-owned company that holds a stake in the plant, ENBPar. It will be US$900 million over the three agreed years.

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After 2026, tariffs will fall to the range between US$10 and US$12 per KW/month. From then on, the service tariff will only reflect the plant’s operating costs.

Itaipu’s service tariff is called the Unitary Cost of Electricity Services (Cuse). It is a charge paid by Brazilians and Paraguayans to cover Itaipu’s costs with:

• administration, operation and maintenance of the plant;
• transfers of royalties and government participation for the use of water;
• plant construction debt.

The minister said he returned “more optimistic” from his trip to Paraguay last week. “I don’t believe that the outcome of this agreement will take place within the next two or three weeks,” he declared.

With the definition of tariffs, the government unlocks negotiations with Paraguay on Annex C, which should begin in six months. Afterwards, the terms will be forwarded to Congress.

Annex C is a part of the Itaipu construction agreement that defines the conditions for commercializing the energy generated.

The expectation is that, with the renegotiation of Annex C, Paraguay will be able to sell the surplus energy generated by the plant on the free market.