Light

Investor Relations

Tariff Reviews and Readjustments

2015 Tariff Readjustment

The Brazilian Electricity Regulatory Agency (“Aneel”), at a public meeting held November 5, 2015, approved an average tariff readjustment index of 24.921, composed of two components: the structural component, of 16.97%, which will be integrated into the tariff; and the financial component, of 7.95%, exclusively applied to the next twelve months. Considering the removal of the financial component of 8.64% currently present in Light’s tariff, Light SESA’s consumers will observe an average increase of 16.78% in their electricity bills. The new tariffs will be applied as of November 7, 2015.

* Extraordinary Tariff Revision

** Change in the denominator makes the sum of the parts slightly different than resulting average not effected.

Regarding the different consumption segments and voltage levels, it is worth noting that residential consumers will perceive a lower-than-average increase of 15.99%, as detailed in the table below, which also presents the increase to be perceived by the other segments and voltage levels.

1 Adjusted for the Extraordinary Tariff Revision effect, in force since March 2, 2015

Average Consumer Increase by Segment and Voltage Level

Voltage Level (consumption segment) Average Increase
A2 11.10%
A3a 20.07%
A4 17.66%
AS 12.99%
B1 (Residential) 15.99%
B2 (Rural) 21.69%
B3 (Commercial) 19.57%
B4 (II. Public) 15.98%
High Voltage 15.94%
Low Voltage 17.21%
Total 16.78%

The annual tariff revision process consists of passing through to consumers non-manageable concession costs (Parcel A - energy purchases, sector charges and transmission charges) and the adjustment of manageable costs (Parcel B – distribution) by the IGP-M price index, minus Factor X, which transfers the concessionaire’s productivity gains to consumers.

The adjustment of Parcel A was of 19.4%, mainly explained by: (i) the variation of 18% in energy purchase costs, largely due to the depreciation of the BRL against the USD, which impacts Itaipu’s tariff; and (ii) Increase of 35% in the CDE (sector charge) after including the payment referring to the ACR Account loan. The average price of energy contracts passed through to the tariff (“PMix”) was of 183.09 R$/MWh.

The adjustment of Parcel B (which is used by Light to cover costs and remunerate investments), reflects the accumulated variation in the IGP-M index from November 2014 to October 2015, of 10.09%, minus Factor X (0.72%), resulting in a final adjustment of 9.37%. In the calculation of Factor X, the improvement of 26.88% in the quality indicators (DEC and FEC) between 2013 and 2014 was considered, resulting in a 0.50% reduction of Factor X, from 1.22% to 0.72%.

As a result, from the average consumer increase of 16.78%, Parcel A costs accounted for 14.8% and Parcel B for 1.9%.

Regarding the evolution of the losses’ combat program, the percentage of non-technical losses passed through to the tariff will be kept at 40.41% over the low voltage market. The actual level of Light’s non-technical losses is under analysis by Aneel, and the result of this process may, if needed, be considered, retroactively, in the next annual readjustment.

For further information, see the documents (in Portuguese only):  Resolução Homologatória nº 1.982 e Nota Técnica nº 289/2015.

2014 Tariff Readjustment

Light S.A. (BM&FBovespa: LIGT3 and OTC: LGSXY) (“Company”), the parent company of Light Serviços de Eletricidade S.A. (“Light SESA”), hereby informs its shareholders and the market in general that the Brazilian Electricity Regulatory Agency, at a public meeting held today, approved an average tariff readjustment index of 23.18%, composed of two components: the structural component, of 14.54%, which will be integrated into the tariff; and the financial component, of 8.64%, exclusively applied to the next twelve months. Considering the removal of the financial component of 3.95% currently present in Light’s tariff, Light SESA’s consumers will observe an average increase of 19.23% in their electricity bills. The new tariffs will be applied as of November 7, 2014.

Regarding the different consumption segments and voltage levels, it is worth noting that residential consumers will perceive a lower-than-average increase of 17.76%, as detailed in the table below, which also presents the increase to be perceived by the other segments and voltage levels.

Average Consumer Increase by Segment and Voltage Level

Voltage Level (consumption segment) Average Increase
A2 20.25%
A3a 19.39%
A4 19.15%
AS 19.83%
B1 (Residential) 17.76%
B2 (Rural) 21.74%
B3 (Commercial) 21.50%
B4 (II. Public) 22.65%
High Voltage 19.46%
Low Voltage 19.11%
Total 19.23%

The annual tariff revision process consists of passing through to consumers non-managerial concession costs (Portion A - energy purchases, sector charges and transmission charges) and the adjustment of managerial costs (Portion B – distribution) by the IGP-M price index, minus Factor X, which transfers the concessionaire’s productivity gains to consumers.

The adjustment of Portion A was of 21.0%, explained by the variation of 20.0% in energy purchase costs, mainly due to the increase in the spot market prices (Difference Settlement Price – PLD), impacted by the deterioration of the system’s hydrological conditions, which affects the cost of energy of Availability Contracts of thermal plants, which are being extensively dispatched.

The adjustment of Portion B (which is used by Light to cover costs and remunerate investments), reflects the accumulated variation in the IGP-M index from November 2013 to October 2014, minus Factor X (1.22%), resulting in a final adjustment of 1.71%.

As a result, from the average consumer increase of 19.23%, Portion A costs accounted for 18.7% and Portion B for a mere 0.58%. The chart below shows all the items that make up Light SESA’s tariff increase. 

2013 Tariff Review

Light S.A. (BM&FBovespa: LIGT3 and OTC: LGSXY) (“Company”), the parent company of Light Serviços de Eletricidade S.A. (“Light SESA”), hereby informs its shareholders and the market in general that the Brazilian Electricity Regulatory Agency (“ANEEL” or “Agency”) has approved the tariff repositioning of Light SESA, including all consumption categories (residential, industrial, commercial, rural and others).

For further information, see the documents (in Portuguese only): Resolução Homologatória nº 1650 and Nota Técnica nº 485/2013.

The main results of the tariff revision are: the tariff repositioning, which establishes tariffs that are compatible with the coverage of the efficient operating costs and the remuneration on reasonable investments; and the X Factor, which establishes productivity goals for the subsequent tariff period.

For calculating the tariff repositioning, ANEEL defines: (i) efficient operating costs based on the updating of the operating costs defined in the previous cycle; (ii) reasonable investments, which compose the Regulatory Remuneration Base; (iii) the level of energy losses to be passed on to consumers; and (iv) non-manageable costs.

Considering the new financial component, applicable only in the next 12 months, and the elimination of the financial component currently present in Light SESA’s tariffs, consumers will see an average increase of 3.65% in electricity bills as from November 7, 2013.

ANEEL also established the Xpd Factor of 1.22% and the Xt Factor of 0%, calculated by the direct application of the equation defined in the regulatory methodology, which depends on market evolution, distribution network length, and the number of consumers between the tariff revisions.

With reference to non-technical energy losses, the percentage to be recognized in the tariff will be 40.41% on the low voltage market, remaining unchanged over the cycle. The amount corresponding to the difference between this percentage and a reference figure that starts from 31.37%, at the beginning of the cycle, until it reaches 30.5% in 2018, will be invested in the Company’s energy-loss-combating program and addressed as Special Obligations, outside the Regulatory Remuneration Base. The progress of the energy-loss-combating program will be monitored by ANEEL as a condition for maintaining the level of 40.41%.

2012 Tariff Readjustment

Light S.A. (BM&FBovespa: LIGT3 and OTC: LGSXY) (“Company”), parent company of Light Serviços de Eletricidade S.A. (“Light SESA”), announces to its shareholders and the market in general that the Brazilian Electricity Regulator - ANEEL, in a public meeting held on this date, approved an average readjustment of 12,27% to Light SESA’s tariffs for captive consumers, been 11,85% for residential consumers, for the 12-month period starting on November 7, 2012.

For further information, see the documents (in Portuguese only): Resolução Homologatória nº 1377 and Nota Técnica nº 393/2012.

The tariff readjustment has two components: the structural component, which now integrates tariff, of 7.17%; and the financial component exclusively applied to the next 12 months, of 3.60%.

Light 2012 Tariff Readjustment
Structural TRI 7.17%
Financial Additions 3.60%
Total 10.77%

The annual tariff readjustment process consists of transferring the concession’s non-controllable costs to consumers, such as energy purchase, sector charges and transmission charges (Parcel A) and the controllable costs adjustment (Parcel B)  by IGP-M (General Market Price Index) less X Factor, which transfers the concessionaire’s annual efficiency gains to consumers.

The variation verified in Parcel A from November 2011 to October 2012, of 4.83%, was affected by 16.89% increase in the energy purchase costs, due to the high of the dollar, which impacts the cost of energy from Itaipu, and the  higher Differences Settlement Price (PLD),  the  latter impacting on the energy  cost of contracts for energy availability of thermal plants.

The Parcel B Variation (that effectively remains with Light SESA to cover its costs and pay its investments) reflects the IGP-M index accumulated from November 2011 to October 2012 of  7.52%, less X Factor of 0.48%, resulting in the final percentage of 7.04%

Taking into consideration the new financial component, exclusively applied for the next 12 months, of 3.60% and the removal of financial component that is currently present into Light’s tariffs, of -0.64%, Light SESA’s captive consumers will have an average increase in their electricity bills of 12.27%, while the increase for free consumers will be of 2.49%, reflecting an average effect of 11.41%, from November 2012.

It is noteworthy that the effects of Provisional Measure 579 of 09.11.2012 are not included in this readjustment, since the tariff reduction is scheduled to take place in February 5, 2013, when ANEEL shall proceed the Extraordinary Tariff Review in all of Brazilian’s energy concessionaries.

2011 Tariff Readjustment

Light S.A. (BM&FBovespa: LIGT3 and OTC: LGSXY) (“Company”), parent company of Light Serviços de Eletricidade S.A. (“Light SESA”), announces to its shareholders and the market in general that the Brazilian Electricity Regulator - ANEEL, in a public meeting held on this date, approved an average readjustment to Light SESA’s tariffs of 6.57% for the 12-month period starting on November 7, 2011.

For further information, see the documents (in Portuguese only): Resolução Homologatória nº 1.232 and Nota Técnica nº 303/2011.

The tariff readjustment has two components: the structural component, which now integrates tariff, of 7.21%; and the financial component exclusively applied to the next 12 months, of -0.64%.

Light 2011 Tariff Readjustment
Structural TRI 7.21%
Financial Additions - 0.64%
Total 6.57%

The annual tariff readjustment process consists of transferring the concession’s non-controllable costs to end consumers (energy purchased for supply, sector charges and transmission charges) – which are calculated in detail on a yearly basis – and the controllable costs adjustment by IGP-M (General Market Price Index) less X Factor, which transfers the concessionaire’s annual efficiency gains to consumers. Concession controllable costs are calculated in detail only during Tariff Review period.

The variation verified in Parcel A (Generation, Transmission and Sector Charges), of 7.33%, was affected by 21.36% high variation of Sector Charges in the period. Among these charges, we point out the variation of Global Reversion Reserve (RGR) which was extended until 2035 through Law 12,431/2011. Another item with relevant variation in the period was related to the System Services Charges (ESS), which went up 19.66% due to costs associated with thermoelectric power plants out of merit order ruling for energy security reasons, as resolved by the Electricity Sector Monitoring Committee (CMSE).

The Parcel B Variation reflects the IGP-M index accumulated from November 2010 to October 2011 of 6.95%, less X Factor of -0.01%, resulting in the final percentage of 6.96%.

Taking into consideration the financial component exclusively applied to the next 12 months, of -0.64% and the removal of financial component built into Light’s tariffs effective up to date, of -1.33%, Light SESA’s consumers will realize an average increase in their electricity bills of 7.82% as of November 7, 2011.

2010 Tariff Readjustment

Light S.A. (Bovespa: LIGT3) (“Company”), the parent company of the LIGHT GROUP companies, announces to its shareholders and the market in general that the National Electricity Regulatory Agency (ANEEL), at a public meeting held on this date, approved the report authorizing an average adjustment of 6.99% in the tariffs of Light Serviços de Eletricidade S.A. (“Light SESA”) for the 12-month period starting November 7, 2010.

For further information, see the documents (in Portuguese only): Resolução Homologatória nº 1.085 and Nota Técnica nº 341/2010.

The adjustment index consists of two components: the structural component of 8.31%, which now forms part of the tariff, and the financial component of -1.33%., applied exclusively to the next 12 months.

Light 2010 Tariff Readjustment
Structural TRI 8.31%
Financial Additions -1.33%
Total 6.99%

The annual tariff adjustment process consists of the pass-through to end consumers, of non-manageable concession costs (energy purchased for supply, sector charges and transmission charges), which are calculated in detail annually, and the restatement of the manageable costs by the variation in the IGPM inflation index, less Factor X, which transfers to consumers the annual efficiency gains of the concessionaire. The manageable costs of the concession are calculated in detail only in the years of Tariff Revision.

The 8.34% variation in non-manageable costs (Part A) is mainly due to the increase in Sector Charges, in turn due both to the recently approved Law 12,111, which increased the costs of the Fuel Consumption Account and the Research and Development Account, and the increase in the System Service Charges. Part B, which corresponds to manageable costs, increased by 7.95%, chiefly due to the 8.81% increase in the IGPM during the period.

Consumers of Light SESA will notice an average increase of 2.20% in their electricity bills starting November 7, as a result of the inclusion of the above-mentioned negative financial adjustments of 1.33% and the end of the previous period’s positive financial adjustments of 4.77%.

2009 Tariff Readjustment

Light S.A. (Bovespa: LIGT3) (“Company”), parent company of LIGHT GROUP’s companies, announces that ANEEL (Brazilian Electricity Regulatory Agency), at a public meeting held on the date hereof, temporarily approved the average tariff readjustment of 5.65% applied by Light Energia S.E.S.A. (“Light”) for the period as of November 7, 2009, comprising all consumption segments (residential, industrial, commercial, rural and other).

For further information, see the documents (in Portuguese only): Resolução Homologatória nº 905 and Nota Técnica nº 358/2009.

The readjustment index, valid for tariffs between November 7, 2009 and November 6, 2010, comprises the following two components: structural, which is now part of the tariff, of 0.88%; and financial, which is valid for the duration of this tariff, of 4.77%.

Light 2009 Tariff Readjustment
Structural TRI 0.88%
Financial Additions 4.77%
Total 5.65%

The tariff readjustment process consists primarily of the transfer of non-manageable concessions costs (energy purchased for supply, sector charges and transmission charges) to end consumers, since these charges are calculated in detail on an annual basis, both in years of tariff readjustment and years of tariff revision. Regarding manageable costs, in years of tariff readjustment, (as per rules set forth in the concession agreements of distribution concessionaires), it varies according to the IGP-M decreased by Factor X, which aims to transfer to consumers the annual efficiency gains of the concessionaire. Manageable costs are calculated in detail only in years of Tariff Revision. In the case of Light, the 2nd Cycle of Periodic Tariff Revision took place, on a provisional manner, in 2008, and the definitive result was ratified in October 2009.

The variation in Non-Manageable costs (Installment A), including financial additions of 7.1%, occurred mainly due to increased charges, particularly PROINFA and Basic Network (“Rede Básica”), as well as to CVA energy related to the last 12-month period. Installment B (manageable costs) reduced by 2.1%, mainly due to the reduction in the IGP-M. Tariffs were also impacted in 1.4% by subsidies determined by Law (Low Income, Special Consumers and Self-Producers).

Light’s end consumers will observe an average 3.40% readjustment in their electricity bills as of November 7, due to the removal of tariffs of the financial adjustments related to the period between November 7, 2008 and November 6, 2009, associated to the recovery of tariff differences of past periods, which had a positive effect of 2.3% in that period’s tariff.

2009 Tariff Review (definitive)

Light S.A. (Bovespa: LIGT3) (“Company”), parent company of LIGHT GROUP’s companies, announces that ANEEL (Brazilian Electricity Regulatory Agency), at a public meeting held on the date hereof, temporarily approved the average tariff readjustment of 5.65% applied by Light Energia S.E.S.A. (“Light”) for the period as of November 7, 2009, comprising all consumption segments (residential, industrial, commercial, rural and other).

For further information, see the documents (in Portuguese only): Resolução Homologatória nº 891 and Nota Técnica nº 329/2009.

The readjustment index, valid for tariffs between November 7, 2009 and November 6, 2010, comprises the following two components: structural, which is now part of the tariff, of 0.88%; and financial, which is valid for the duration of this tariff, of 4.77%.

In view of what was previously established in November 2008, the main amendments introduced by ANEEL are:

  1. Reference Company now goes from R$575 million to R$583 million. ANEEL disclosed on August 12, 2009, as a result of the Public Consultation no.051/2009, the amount of R$565 million for the Reference Company;
  2. (Decrease in annual investments from R$390 million to R$364 million;
  3. As to non-technical losses, which had been previously calculated on grid load, are now calculated on the low-voltage market, considering a declining trajectory until the end of the tariff cycle. The start point for non-technical losses is now 38.98% and the final point, 31.82% of the low-voltage market.

Other significant variable when establishing a tariff, such as delinquency ratio (0.90%), X Factor (0.0%) and Market Growth for the X Factor (1.5%) remained unaltered concerning what ANEEL provisionally established in November 2008. Both Gross and Net Regulatory Assets Basis (R$8,077 million and R$4,674 million respectively) have remained unaltered as well. The Final Review results can be considered as neutral comparing to the Preliminary Review – which had already represented an important advance in specificities recognition of Light’s concession area.

Light’s tariffs will be readjusted on November 6, 2009 as per ANEEL resolution to be disclosed, considering:

  1. The effect resulting from the difference between the new percentage of 2.06% and the temporary percentage of 1.96% set forth in November 2008, as previously mentioned; and
  2. the annual readjustment index for the period from November 6, 2009 to November 6, 2010, yet to be resolved.

 2008 Tariff Review (provisory)

Light S.A. (Bovespa: LIGT3) (“Company”), parent company of LIGHT GROUP’s companies, announces that ANEEL (Brazilian Electricity Regulatory Agency), at a public meeting held on the date hereof, temporarily approved the structural tariff repositioning of 1.96% applied by Light S.E.S.A. (“Light”) for the period as of November 7, 2008, comprising all consumption segments (residential, industrial, commercial, rural and other).

For further information, see the documents (in Portuguese only): Resolução Homologatória nº 734 and Nota Técnica nº 339/2008.

The tariff revision process has as main results: the tariff repositioning, which establishes tariffs compatible with the coverage of efficient operational costs and remuneration over prudent investments and; Factor X, which establishes productivity targets ti the subsequent tariff period.

For the calculation os tariff repositioning, ANEEL carries out the determination: (i) of efficient operational costs, using the Reference Company – ER methodology, (ii) of prudent investments, using the Regulatory Asset Base, and (iii) of the regulatory losses level to be transferred to the consumers and (iv) of non-manageable costs, which comprise Parcel A.

The regulatory Asset base was ratified as definitive, and the others items (Reference Company, Losses Level and Delinquency) were defined as temporary. For the calculation of the Reference Company, ANEEL applied the new proposed model as a result of the Public Audience 052.

In addition, ANEEL established new regulatory levels to losses and delinquency. Regarding losses, the index changed to 19.15% over grid load. The previous level was 15.97%. With respect to delinquency, the level to be considered in this revision is 0.90% of the gross distribution revenue, given that the previous index was 0.50% of the net distribution revenue (excluding ICMS).

Taking into account the financial tariff components which are not of the tariff base, but are part of the amounts relative to the 12-month period subsequent to the revision, the tariff repositioning index was 4.26%.

It is worth pointing out that Light’s end consumers will observe an average 4.70% readjustment in their electricity bills as of November 7, due to the financial additions included in the tariff related to the period between November 7, 2007 up to present, associated to the recovery of tariff differences of past periods, which had a negative effect of 0.41% in that period’s tariff.

ANEEL also established, temporarily, Factor X of 0.0%, to be used as of the 2009 tariff readjustment. The calculation of Light’s Factor X was already carried out, taking into account the new methodology proposed in the scope of Public Audience 052. The amount will be validated in the ratification of the results of said Audience, foreseen to next week.

Applying the tariff alignment, where indices are different to high-voltage and low-voltage consumers, the average readjustment to each voltage level calculated by ANEEL will be as follows:

Tension Level Effect on consumers
Low tension 3.29%
A4 5.43%
A3a 7.40%
AS 5.43%
A2 4.44%
Average value 4.70%

The table below shows Light’s 2008 periodic tariff revision result breakdown.

Tariff Revision 2008 In thousands of R$
Verified Revenue 5,102,841
   
Parcel A 3,531,847
Purchased Energy 2,455,572
Sector Charges 643,772
Energy Transport 432,503
   
Parcel B 1,690,381
Capital Remuneration 704,485
Reference Company 575,868
Delinquency 66,737
Reintegration Portion 343,291
   
Total Required Revenue 5,222,228
(-) Other Revenues 19,221
Net required Revenue 5,203,007
Financial Components 119,817
   
Economic Repositioning 1.96%
Financial Adjustment 2.30%
Total Repositioning 4.27%
   
Gross RAB 8,007,437
Net RAB 4,673,711

Finally, with respect to financial additional, it is worth pointing out that ANEEL approved the administrative appeal filed by Light in its 2007 readjustment. In said appeal, the company requested the recalculation of CVA Energia relative to the period of 2005 and 2006. The impact of this decision was R$ 76,8 million, which represented an additional of 1.48%.

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