Brazil’s Next President May Be Forced to Ration Power

One of the challenges facing the winner of this month’s presidential election runoff in Brazil will be how to keep the lights on, according to Erico Evaristo, head of energy trading company Bolt Comercializadora.

With the dry season expected to last until Oct. 20 and average rainfall expected for November and December, power suppliers in 2015 will have to rely on expensive energy generated by thermal plants, Evaristo said. This means high energy prices and the possibility of rationing.

“We’re very worried about energy rationing for next year,” Evaristo said in telephone interview. “None of the models forecast the volume of rain necessary to recover the level of water in reservoirs.”

The last time Brazil was forced to ration power was in 2001. President Dilma Rousseff has used that episode to stoke fears about Aecio Neves, the Brazilian Social Democracy Party candidate.

Neves pulled off a surprise second-place finish on Oct. 5 to force an Oct. 26 runoff with Rousseff. He is from the same political party as Fernando Henrique Cardoso, who was president in 2001.

“The Brazilian people don’t want to bring back those that brought energy rationing,” Rousseff told supporters after the Oct. 5 vote. “The Brazilian people don’t want to bring back what we can call the ghosts of the past.”

Seventy percent of Brazil’s energy is generated by hydro-power. The worst drought in more than 40 years has forced distributors to buy more expensive energy on the spot market, reselling it for a loss under a government-set price cap.

The Electricity Sector Monitoring Committee, which met at the Mining and Energy Ministry today, sees a 4.7 percent chance of an energy deficit in 2015, down from 4.8 percent last month, according to a statement on the ministry’s website.

Brazil in March pledged about 12 billion reais ($5 billion) of aid for utilities to manage the impact of high-priced replacement power.

“Everything depends on rains in the first quarter of next year,” Evaristo said. “The situation is pretty critical.”

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