Brazil Considering Support for Power Utilities Following Drought

Brazil may provide power distributors with financial support as a drought depletes reservoirs at dams and drives up the price of electricity, the head of the government’s energy-research agency said.

“Government will not let distribution utilities suffer a bigger financial burden than they are capable of facing,” Mauricio Tolmasquim, president of Empresa de Pesquisa Energetica, told reporters in Brasilia after a blackout hit parts of Brazil yesterday. EPE, as the agency is known, is part of the Ministry of Mines and Energy.

Reservoirs at dams in Brazil’s southern region are running low after the driest January since 1954, Tolmasquim said. The heat wave caused cattle prices in Brazil to surge to a record this week, while sugar futures are posting the longest rally in four months and soybeans touched a two-week high.

Brazilian utilities including Metropolitana Eletricidade de Sao Paulo SA and Ampla Energia & Servicos SA may face as much as 15 billion reais ($6.2 billion) of losses due to the higher spot price for power, Erico Evaristo, head of Sao Paulo-based trader Bolt Comercializadora, said Jan. 31 in a telephone interview. The government will have to step in to make sure those costs aren’t passed on to consumers, he said.

“Any calculation on the magnitude of that help is still too premature,” Tolmasquim said. “But we want to make the distribution utilities assured that we won’t allow them to be hurt in a situation that is not their fault.”

The government will investigate blackouts caused by two short circuits that shut off power from 2:03 p.m. to 3:30 p.m., affecting utilities throughout Brazil, he said.

Low water levels at the nation’s reservoirs has led Brazil to produce more energy from fossil fuels. The country’s power system is “diversified” and there will be no need for energy rationing, Tolmasquim said.

To contact the reporters on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net; Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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