What are tariff flags?

This post’s subject is the Brazilian tariff flags system. Origin and how it works.

When appeared and why?

More than 65% of electric energy generated in Brazil come from hydro power plants.

This energy source depends on water level in reservoirs. Occasionally, reservoir stays in low level due to lack of rains. In this situation, it is necessary to activate thermoelectric plants to supply the demand. Consequently, cost of electrical energy increases and it is repassed to the consumer.

In May 2013, resolution n° 547 of Electric Energy Nacional Agency (ANEEL) instituted the tariff flags system. 2013 and 2014 were test years and in January 1st, 2015 has been implemented. Tariff flags were created to consumer have more transparency about electricity bill and take decisions to more conscious use.

How it works?

They adopt the same colors of traffic light. They indicate if there is additional cost in electricity bill, depending on generation conditions.

• Green flag: Favorable conditions to energy generation, hydro power plants work properly and no additional cost.
• Yellow flag: Less favorable conditions, hydro power’s reservoir are less empty and some thermoelectric have been activated. There is addition of R$ 0.015 to each consumed kilowatt-hour (kWh).
• Red flag threshold 1: Expensive conditions, reservoirs in low level and thermoelectric are necessary. More R$ 0.040 to each consumed kilowatt-hour (kWh).
• Red flag threshold 2: More expensive conditions, water shortage in reservoirs and high demand from thermoelectric. Additional R$ 0.060 per kWh to consumer.

As exemple, in this electricity bill the tariff flag (ENERGIA CONS. B. ) is yellow and have additional cost of R$ 1.02.

How ANEEL knows which flag use each month? The Electric System National Operator (ONS) make calculations predicting average cost to the next month and determines if needs more energy from thermoelectric.

Some useful information

• You don`t pay more because of tariff flags, these are a form to inform adjustments to consumer.
• The National Interlinked System (SIN) is divided in four regions (South, Southeast/ Midwest, North and Northeast). Each one of these subsystems receive a tariff flag for each month.
• In ANEEL`s site, click here, it is possible to see tariff flag of month. In this month of August 2019, will be red threshold 1.