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Eletropaulo Plummets After Zero Rate Increase: Sao Paulo Mover

Eletropaulo Metropolitana de Eletricidade de Sao Paulo SA, a Brazilian power distributor, slumped to a record low after getting an average electricity rate increase equal to zero from the country’s regulator.

Eletropaulo dropped 7.2 percent to 5.78 reais at the close in Sao Paulo, the lowest since the shares started trading in September 2006.

Brazil’s electricity regulator, known as Aneel, set revised caps on how much Eletropaulo can charge different types of consumers that will amount to a weighted-average increase of zero in a vote today. The decision comes as President Dilma Rousseff grapples with inflation that has helped trigger nationwide street protests and follows an 18 percent cut on household rates for some utility concessions renewed this year.

“This can’t be good news,” Luiz Roberto Monteiro, a broker at Renascenca DTVM, said in a telephone interview from Sao Paulo. “Everyone is concerned about who is going to be next in not getting an increase.”

The government will give Sao Paulo-based Eletropaulo 506 million reais ($226 million) of aid in compensation for higher costs with thermal electricity during a drought that undercut hydro-power generation, Chief Executive Officer Britaldo Soares told reporters in Brasilia after the Aneel vote. This will help offset the zero increase, he said.

Aneel rules on rate changes based on criteria such as the company’s performance, costs and efficiency.

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