IDEAS home Printed from https://ideas.repec.org/p/rio/texdis/583.html
   My bibliography  Save this paper

Cost of electricity in Brazil: Effects of 2004 regulatory reform

Author

Listed:
  • Marina Figueira de Mello

    () (Department of Economics PUC-Rio)

  • Monica Barros

    () (ENCE/IBGE)

Abstract

In 2004, in the beginning of the first president Lula mandate, a complete regulatory reform of electricity was launched. In 2008, four years after, Brazilian Congress started an investigation of the causes of Brazilian relatively high electricity tariffs. The results of the investigation pointed out numerous reasons, but failed to identify generation costs as one of the main causes. In this paper the analysis done by Congress is broadened addressing the trend in electricity production costs. The main conclusions are that the implementation of auctions together with subsidies from state enterprises did not reduce future acquisition costs as much as expected, but successfully reduced the rhythm of price increases. The long run marginal expansion cost is increasing very fast because new hydro plants are ever more distant of consumption centers and environmental costs are difficult to mitigate. Thermal plants and other technologies, though increasing in importance, still have much higher prices. In case prices reflected marginal incremental costs, electricity prices would have been much higher. The fact that consumers do not see such high incremental costs, allow them to take wrong consumption decisions. As consumers are able to buy at prices lower than marginal cost, consumption levels go too far. Demand increases amplify the electricity market gap and reinforce the necessity of new investments.

Suggested Citation

  • Marina Figueira de Mello & Monica Barros, 2010. "Cost of electricity in Brazil: Effects of 2004 regulatory reform," Textos para discussão 583, Department of Economics PUC-Rio (Brazil).
  • Handle: RePEc:rio:texdis:583
    as

    Download full text from publisher

    File URL: http://www.econ.puc-rio.br/pdf/td583.pdf
    Download Restriction: no

    More about this item

    Keywords

    Electricity; regulatory reform; energy auctions and generation costs. JEL Codes: L43;

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rio:texdis:583. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/dpucrbr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.