The unsustainable lightness of the R$ 140 billion "jabuti" (a term used in Brazilian politics to refer to an unrelated amendment added to a bill) included in the electricity sector's draft law.

The Senate Infrastructure Committee session was proceeding normally on the afternoon of Tuesday, July 14th, with the scheduled vote on Bill 5.017/2019, which dealt with the creation of discounts for irrigation and aquaculture activities, as well as the exploitation of artesian wells, to be incorporated into the rural electricity tariff.

Ironically, a power outage in the Senate building interrupted the session, and upon returning, with the plenary practically empty, the text of the bill was already distorted, receiving alterations that were not part of the original proposal - in the jargon of the National Congress, the famous " jabutis ," that folkloric character that insists on climbing legislative trees.

Next, the bill with the hastily added amendments was voted on and approved in less than a minute – without even giving the senators present time to read the changes, which increased the text of the initial bill from 2 to 11 pages, full of unrelated amendments, that are expected to raise electricity bills by at least R$ 140 billion.

The substitute bill for Bill 5017/2019, authored by Senator Hermes Klann (PL-SC) – who, incidentally, was appointed as the bill's rapporteur just hours before the session – included articles that mandate the compulsory contracting, for 30 years, of 2,500 MW (megawatts) in natural gas -fired thermoelectric plants , with a minimum inflexibility of 70%, starting in 2027, and 4,900 MW in small hydroelectric plants ( PCHs ), with a staggered schedule until 2035.

The new text also removed the responsibility for the costs of storage systems from large power generators – a topic still under discussion in a separate bill in the Chamber of Deputies – passing this expense on to consumers. One of the articles went so far as to require that thermal power plants contracted in the Northern Region use natural gas of "Amazonian origin".

The substitute bill was carefully crafted to obligate Aneel (the regulatory agency for the electricity sector) to contract thermal power plants and small hydroelectric plants regardless of any need assessment – in practice, eliminating the step in which the National Council for Energy Policy (CNPE), the main body of the Executive branch for evaluating energy sector policies and guidelines, decides whether the contracting is necessary.

Experts consulted by NeoFeed warn of the billion-dollar impact of these measures, but the rapporteur of the bill, riddled with unrelated amendments, insists on treating everything as "regulatory improvement."

"Considering the strategic relevance of the matter to the national energy infrastructure and the need to broaden its scope to meet structural demands of the electricity sector, especially the expansion of generation in the Northern Region, the use of the hydroelectric potential of smaller plants, energy security, and the commitments associated with the privatization of Eletrobras, a substitute bill was prepared that preserves and expands the original object of the proposal," argued Senator Klann in the report.

"Mother tortoise"

The approval by the Senate Infrastructure Committee is not final, and the bill still needs to be debated in the Senate plenary before being sent to the Chamber of Deputies. Surprised by the bill's approval in the Senate committee, the federal government is working to return the matter to the committees, possibly to the Committee on Economic Affairs (CAE).

But given how frequently bills and provisional measures in the electricity sector being processed in the National Congress are riddled with "jabutis" – not the friendly Amazonian turtle, but this much more expensive legislative beast that usually leaves behind billions in debt – it is quite likely that the proposal will move forward.

A survey conducted in April by the Acende Brasil institute mapped 15 electricity sector bills with unrelated amendments (jabutis) currently being processed in the National Congress – the bill voted on this week is not part of the list, as the unrelated amendments were introduced at the time of the vote.

The problem is that, if approved as is, Bill 5.017/2019 is expected to increase electricity bills for consumers, families, and businesses by well over R$ 140 billion. This figure, cited by Sérgio Pataca, coordinator of Energy Services and Business at the Federation of Industries of the State of Minas Gerais (FIEMG), refers only to the mandatory contracting of thermal power plants imposed by the new law.

Pataca based his work on the methodology used in Law 14.182/2021, concerning the privatization of Eletrobras—which began as a concise provisional measure and ended up being converted into law with a collection of provisions that had nothing to do with the original topic, including the same compulsory contracting of thermal power plants, which did not pass. Because of the number of random amendments included at the time, the Eletrobras privatization law became known as the "mother tortoise."

“The real cost, therefore, could be much higher than the R$140 billion estimated by the consulting firm PSR at the time of the Eletrobras auction, since additional elements—such as the allocation of energy storage costs to consumers—are still uncertain and could significantly increase the total,” says Pataca. “Approving a billion-dollar subsidy package without public debate and on the eve of the recess is a lack of respect for society.”

According to him, the unrelated amendments included by Congress in sector votes are increasingly putting pressure on electricity bills: "The Energy Development Account (CDE), which finances various subsidies, represented about 5% of the electricity tariff in 2015 and today reaches 22% in some regions."

Pataca argues that the electricity sector, which should be governed by technical criteria from bodies such as Aneel and the Ministry of Mines and Energy, has been shaped by political interests in Congress. Therefore, he advocates that all subsidies currently embedded via CDE be transferred to the Treasury. "This would increase transparency, demand efficiency, and subject spending to the TCU (Federal Court of Accounts) and the annual budgetary process, reinforcing the accountability of public managers."

The FIEMG expert says there is consensus in the productive sector regarding the modernization of the electricity sector. "However, there are fears that broad reforms, which are usually approved via bill or provisional measure, could become vehicles for more hidden agendas, given the ease with which they can be distorted in Congress," he states.

Other damages

Paulo Pedrosa, president of Abrace Energia – an organization that brings together more than 50 business groups responsible for almost 40% of the country's industrial electricity consumption and 42% of its industrial gas consumption – does not hide his indignation at the "absurd" way the project was approved.

He says he contacted a senator from the Infrastructure Committee, who admitted he didn't know what had happened. According to him, the senator stated that he left before the end of the session after the power outage and only later learned of the approval.

"The lack of transparency and the rushed voting process compromised the legitimacy of the law's approval, even taking the senators by surprise," says Pedrosa.

According to the expert, the additional cost of R$ 140 billion for thermal power plants imposed by the new law is just one of the expected damages to the electricity sector. "The law aims to make gas pipelines viable by requiring the contracting of thermal power plants, which will consume the transported gas," he warns.

In practice, the substitute bill revives the proposal to contract "thermal power plants with CEP" – as foreseen in the Eletrobras privatization law. The term refers to locational thermal power plants, so called because the privatization law required the contracting of these plants in pre-determined regions, generally without natural gas infrastructure.

The future of contracting for onshore thermal power plants, however, currently depends on the analysis of vetoes to the Offshore Wind Energy Law, where a provision aimed at this objective was also inserted.

“The bill is not absurd simply because thermal energy is expensive, but because it is expensive, unnecessary, and will displace renewable generation,” says Pedrosa, who predicts a cascading effect, since by entering the energy mix with priority in dispatch, this thermal energy will force a reduction in generation from cheaper sources, such as solar and wind, aggravating curtailment – the cutting of renewable generation by the ONS, the regulatory body of the electricity system, to avoid overloading the grid.

"This not only raises the overall cost of energy, but also creates a legal liability, as renewable energy generators, harmed by the measure, will seek compensation," he predicts.

Pedrosa draws attention to the seriousness of the situation. "The logic of these tortoises is that they destroy the competitiveness of industry and the value of the economy," he warns. According to him, when projecting the cost of energy, Brazil could be the country of clean and cheap energy, but it is becoming a country with more expensive electricity than Europe.

Data from Abrace shows that industrial energy consumption has been stagnant in the country for 14 years and is trending downwards. "It's a process of economic transformation; that's the big discussion," he states.