Bill may have the most expensive tariff flag from may, say analysts

SAO PAULO (Reuters)-well below the historical average Rainfall in the area of hydropower, Brazil's main source of generation, and a strategy for generators must push energy costs in 2019, increasing chances of light have accounts from May to called "red flag 2 level", said experts at the Reuters.As tariff increase flags electricity costs when leaving the plateau green to yellow or red, divided into two levels, in a mechanism created by the national agency of Electric power (Aneel) to signal consumers the highest or lowest offer. The definition of the flag is given by the Agency every month based on spot prices of electricity, influenced by the rains, and the level of production of hydroelectric power plants, known in the industry by the acronym "GSF". The Manager strategic monitoring of Sphere Energy marketer, Daniel Ito, explained that the generators bet in higher energy prices in the second half in 2019 and allocated the power they possess for sale this year mainly from May. This movement, already seen in the past, was even more aggressive in 2019, which in practice should lead to production of hydropower plants to be well below what they have undertaken to deliver in these months, before the rains to fill reservoirs. Would like that, from may, a "hydrological deficit", or below 1 GSF, increasing chances of triggering of the flags, he explained. "In May we can already move to red flag, at least 2 level red. And in June, for sure (it would be red flag), if you keep this bad scenario (rainy season), "said Ito, pointing out that the tariff mechanism could follow in the most critical level by November. On the other hand, the strategy of generators to sell more energy in the second half favors a hydroelectric production above the volumes marketed by them until April, which reduces chances of additional charge in these months, even in the face of rain unfavorable. " Our expectation is that until about April we meet green flag, for more than the price (spot) is high, "added Ito. The Energy Marketer's Director, Larry Pegorini, also assessed the energy allocation strategy of generators, known as "sazonalização", will increase the risk of extra costs with tariff flags in the second half. "Only with this already indicates that there is a high likelihood of tariff 2 level flag terms from June to November. Of course that will depend on St. Peter, if it's going to rain from now on, but, looking at the past, he pointed out. Analysts stressed, however, that the regulation of flags provides that Aneel can change drive standards every April, which eventually could impact the current projections. PIOROUA tariff was green flag SCENARIO in January and February, although the rains during the period they stayed below the predicted, leading to a raised spot prices of energy. If the hydrology does not improve, a flag red tariff from may or June would be a frustration of positive expectations views at the end of 2018, when it was believed that the rains might have less impact on electricity bill this year. In 2018, the tariff level 2 red flag was thrown in every month from May to October--which generates an extra cost of 5 reais to each 100 kilowatts-hour for consumers. After they begin to retreat even in mid-December, the rainy season in the region of the dams were in January below the historical average 70%, while projections for February points to 71% from the average in the Southeast, which concentrates the largest reservoirs.