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Brazil Puts Up Funds for Distributors to Counter Cost Increases

Brazil will provide funding for electricity distributors such as Light SA (LIGT3) and Eletropaulo Metropolitana Eletricidade de Sao Paulo SA after an increase in the use of thermo plants amid low dam levels pushed up costs.

“We are going to help out the distributor companies hurt by the use of thermo plants,” Energy Minister Edison Lobao told reporters in Brasilia today. “We are using money from a fund collected by energy sector fees to pay for the use of thermo plants.”

The so-called CDE industry development account will provide funding for distributors, according to a decree published today in official gazette. The program is designed to avoid passing on higher generation costs to consumers. Distributors have lost 5 billion reais ($2.55 billion) since October, wiping out gains anticipated from a government initiative to cut energy expenses, according to an estimate from the Distributors Association, known as Abradee.

“We have 11 billion reais from funds from electricity sector fees and this will be enough for this,” National Treasury Secretary Arno Augustin told reporters.

To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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