Congress overturns Lula's vetoes and reinstates the benefits that increase electricity bills

Congress on Tuesday (17) overturned President Lula's (PT) vetoes to different provisions of a law that deals with investment in offshore wind power . The decision by parliamentarians benefits businesspeople in the sector and increases Brazilians' electricity bills.

The vetoes overturned on Tuesday could cost a total of R$197 billion in electricity bills by 2050, according to Abrace (the Association of Large Industrial Energy Consumers and Free Consumers). The bill could be even higher after the analysis of items that were postponed.

Aware of the risk of total defeat in the discussion, the government has given in in recent months on some of the items to try to preserve the veto on the section that causes the greatest harm to the consumer : the contracting of gas plants with 70% inflexibility (a regime in which they operate continuously, even when not necessary).

If this point is dropped, the contracting of thermoelectric plants seen by consumer associations as expensive and polluting would be unlocked. This section alone could increase the electricity bill by R$306 billion by 2050, according to the PSR consultancy.

The main part of the discussion on thermal power plants was postponed, but the veto on a small part that guarantees the contracting of these and other plants for the coming years was overturned. These projects may benefit even more depending on the future analysis of other points in the text (such as the one that raises the price ceiling for contracting the plants).

During the session, Congress overturned vetoes that benefited small hydroelectric power plants (SHPs), ethanol, wind power, and other incentives for renewable sources. On all these points, the government argued different reasons for the proposals not to become law—such as the increase in tariffs and the lack of public interest.

The government leader in Congress, Senator Randolfe Rodrigues (PT-AP), said after the session that the "possible impact" on the electricity bill will be the target of a MP (provisional measure) in the future.

"Any impact on Brazilians' bills will be the subject of a provisional measure that the government will shortly issue and will forward to the National Congress to ensure that there is no impact on Brazilians' electricity bills," said Randolfe.

In a statement, the FNCE (National Front of Energy Consumers) stated that it is considering going to the STF (Supreme Federal Court) against the jabutis, which, it estimates, could increase electricity bills by 3.5%. According to the entity, the text has no economic justification and may be unconstitutional.

"The Legislative Branch, once again, demonstrates disrespect for constitutional and democratic principles by persisting in defending proposals that harm the population," the entity states. "These are unnecessary measures from the point of view of the operation of the electrical system and, in addition to the high cost, they have the potential to further increase the already high oversupply of energy in the country," says the Front, which also cites the risk of chaos in the electrical sector.

One of the vetoes that was overturned prevented the contracting of 3,000 MW (megawatts) of PCHs in all regions of the country with the respective contracting terms. The government claims that, although these plants represent a renewable source, there is an increase in the tariff and a disadvantage in relation to other sources due to the lower predictability of energy availability.

"Studies would be necessary to conclude that it is advantageous," the government stated at the time of the veto, which sees a market reserve created by a legal instrument. "It is understood that alternative sources of electricity are already competitive today and that establishing a market reserve for this source is considered neither necessary nor efficient," said the Ministry of Development when recommending the veto to Lula.

This is the section with the greatest impact on the electricity bill. According to Abrace, the cost is R$140 billion at this point.

Congress also overturned the veto on a section that contracts 250 MW of liquid hydrogen energy from ethanol in the Northeast.

According to the government, in addition to creating a market reserve, the section deals with a technology that is still in its infancy, with no energy being commercialized based on this source at the moment. According to Abrace, the cost of this section is R$28 billion over the years.

Furthermore, overturning the veto on this item guarantees the contracting of wind energy from the Southern Region until the second half of 2025. At this point, Abrace calculates a cost of R$5 billion.

Vetoes that prevented the extension of Proinfa (Program to Encourage Alternative Sources of Electric Energy) were also overturned. Proinfa was created by law in 2002 and contracted, until December 2011, 2,650 MW of wind farms, small hydroelectric plants and biomass plants for a period of 20 years.

According to the government, the program has contributed in the past to the diversification of the national energy matrix. However, the Lula administration understands that this generation is already competitive and that the mechanism is no longer efficient in encouraging any source of electrical energy (even renewable ones).

According to Abrace, the cost is R$24 billion at this point.

Those vetoes linked to the hiring of thermoelectric plants, seen as the most problematic point, were postponed to a future session.

The hiring of these plants was transformed into law by deputies and senators previously, in 2021. That was when then-president Jair Bolsonaro (PL) and his ministers Paulo Guedes (Economy) and Bento Albuquerque (Mines and Energy) sent a MP (provisional measure) to Congress to privatize Eletrobras.

Right at the beginning of the text , the Bolsonaro administration proposed what the company's sale model would be. The text said that more shares would be issued on the Stock Exchange, with the Union being prevented from buying the new shares – which would open up space for the company to receive new partners and be privatized.

During the process, Congress added a comma and 3,773 more characters to this section that had nothing to do with the main topic—a jabuti, in political jargon. The initiative by the parliamentarians corresponds to an entire page with just one period at the end, which became known as the "Saramago amendment."

The reference to the writer is made precisely because of the most famous characteristic of the Portuguese Nobel Prize winner in Literature, which is avoiding full stops even in long paragraphs. Just like the author of "Blindness," the parliamentarians created a text without breaks and embedded it in the crucial part of a proposal that was originally of interest to the government—making a presidential veto as difficult as possible.

Since the President of the Republic cannot veto just a section, but rather the entire article – or paragraph, clause or subparagraph – blocking the provision created by the parliamentarians would mean blocking the company's sales model. Bolsonaro ended up sanctioning the text without vetoing the item .

The paper monster was created by the rapporteur of the project in the Chamber of Deputies, Elmar Nascimento (União-BA). He wrote in his report that the measure was made due to the "need to provide greater energy security in the transition scenario" after the privatization of Eletrobras.

The text was incorporated by Senator Marcos Rogério (PL-RO), rapporteur of the proposal and one of the main names in the Bolsonaro base. In his opinion , he stated that the provisions would result in a reduction in the electricity tariff — exactly the opposite of what the sector's consultancies calculate.

The proposal directed the contracting of thermoelectric plants to specific locations (and therefore to specific projects). In one section, for example, the law determines the contracting of 2,500 MW in the Central-West region, in capitals where there is no natural gas supply point (i.e. Brasília and Goiânia).

The text runs roughshod over the Executive Branch's energy planning by providing for, in addition to the contracting of gas plants where there are no pipelines, the purchase of energy from small hydroelectric plants and a 20-year extension of subsidies for renewable sources (seen today by consumer associations as unnecessary).

If all planned thermoelectric plants were to be implemented, the main scenario projected by EPE (Energy Research Company) is that the volume of emissions resulting from electricity generation would increase by 84% by 2034, to 26.9 million tons of CO2eq (carbon dioxide equivalent). The so-called degree of renewability of the electricity matrix would fall from 94% to 89%.

What prevented this strategy was the technical team from the Ministry of Mines and Energy, which managed, without much fanfare, to impose a price ceiling during the process, which prevented most of the contracts from being signed. The auctions began to take place, but were empty. Of the 8,000 MW planned, only 754 MW have already been contracted and 7,246 MW are awaiting the next auction.

Now, to unlock thermoelectric plants, Congress is on a new offensive on the issue. Lawmakers are currently using the discussion on the offshore wind power law to relax the price cap rule that has prevented auctions.

Lula vetoed the offshore wind farm bill at the beginning of this year after a consensus among four ministries . However, parliamentarians have the final say and can override the president's vetoes.

According to the PSR consultancy, in a study published in January, this and other provisions in the proposal have a direct impact on consumer costs. This represents an additional R$20 billion per year until 2050, equivalent to R$545 billion in adjusted values ​​until the future. This represents a 9% increase in energy costs, with direct repercussions on inflation, the population's purchasing power and the country's industrial competitiveness.

• Small Hydroelectric Plants: R$ 140 billion
• Hydrogen: R$ 28 billion
• Proinfa: R$24 billion
• Wind power in the South: R$ 5 billion

Source: Embrace.