Financial Difficulties Facing Power Companies in Brazil :: Energy, electric, Utilities

Due to the size of the losses and their impact on the income of power distribution utilities, this issue has become a matter of much concern to these enterprises which must estimate them properly and draw up solutions to curb them effectively. Another pressing problem on the power market is payment in arrears . Over the past decade, the capacity to make prompt payment for essential services has been dropping sharply in Brazil, whether they are provided by the Government or by public utilities private enterprises. With rising unemployment and shrinking income, many consumers are forced to postpone payment of their electricity bills, particularly in view of steady tariff increases, which rose an averagea total of 231.24% between 1995 and 2004 . (ANEEL, 2004), well over the inflation rate, as a result, it is estimated that unpaid electricity bills in Brazil reached R$ 3.15bn (US$1.3bn) in 2002. The composition of these overdue payments, as per customer group, shows that R$760mi (US$304mi) was caused by unpaid electricity bills from medium and large clients, supplied with high and medium voltages (Group A); R$1,6bn (US$640mi) corresponding to debt built up by residential consumers, small commercial and industrial companies, much from Government facilities, and street-lighting, all supplied by the low voltage network (Group B); and R$800mi (US$320mi) owed by Governments. AGAIN? WHERE THE GOVERNMENT IS? An important point issue is the strong relatiosnships between electricity losses and unpaid bills. These two phenomena are so closely linked that a reduction in one may prompt an increase in the other. A customer caught stealing power is connected up properly to the grid and is then charged for the stolen power, in addition to a fine, payable in installments. If the costumer fails to pay thiese unpaid electricity billss and/or fails to pay the installmentscharges, the power supply is interrupted after some a short time. A customer without power may well return to stealing, again becoming again a loss problem. This same cycle may also be triggered by unpaid electricity bills: when customers have their power supply cut off because they are unable to pay their bills, they may start to steal through clandestine connections, with similar consequences. The cycle may start with unpaid electricity bills. A customer unable to pay his/her bill has his/her power supply cut off, which ca n lead him/her to steal. In other words, a more severe reaction by public utilities in relation to unpaid electricity bills may have as an unintended and undesirable consequence to turn a defaulters into a â€Å"thieves†f.