Electric companies see defaults fall to close to pre-pandemic levels

Electric utilities, which have faced a jump in customer defaults in recent months due to the coronavirus pandemic, have already seen payments rebound to levels close to pre-crisis levels, a representative from the Ministry of Mines and Energy.

“We had a history of around 1% to 2% (default rates) and at some point (in the midst of the pandemic, an index) close to 10%. (Now) we have seen a significant reduction, still above normal, but already very close to that”, said the secretary of Electric Energy of the portfolio, Rodrigo Limp.

The secretary, who spoke during an online event promoted by the consumer protection institute Idec, did not provide further details on current default rates.

The ministry even released data on non-payment in the distribution sector in a weekly newsletter with information on the impacts of the pandemic on the energy sector, but the data is no longer available in the latest editions of the newsletter.

Limp also highlighted that there was a “significant” recovery in electricity demand in Brazil, which in the last 30 days has shown a reduction of 3% to 4%, compared to a retraction of more than 10% in April and May.

With the sharp drop in consumption and greater default, the government made possible an operation to support the cash of energy distributors that will involve a loan of around 15 billion reais to companies in the sector through a group of banks led by BNDES.

The financing will be paid off in five years, with the possibility of passing on the amortization costs to the tariffs.

According to Limp, this support mechanism, which was named Conta-Covid, will relieve consumers of heavier tariff adjustments previously planned for this year, which will now be diluted over a longer period.

“If there were no Covid-19, there would be a strong tariff pressure in 2020, on the order of 12%. Which, at a time when the population over the economic effects of the crisis, would affect the resumption of economic activity that we so hope for,” he said.

“We will have an impact on the order of 3%, that is, 4 times smaller”, he added.

Among the main companies in the electricity distribution sector in Brazil are groups controlled by the Italian Enel, the Chinese State Grid and the Spanish Iberdrola, as well as local companies such as Energisa, Equatorial, Cemig and Light.

Source: Época Negócios