Regulatory Environment

Rate Adjustments/Reviews

Energy rates are set by ANEEL via periodical procedures established in concession agreements, supported by mechanisms that aim to establish an adequate rate level to guarantee the economic and financial equilibrium of companies at the minimum cost to consumers.

The main rate regulation mechanism is the so-called Periodical Rate Review, which takes place every four or five years at Energisa Group‘s distribution companies. This mechanism essentially aims to re-determine the efficient level of operating costs and investment remuneration.

In addition to this mechanism, every year Ordinary Rate Adjustments are made to adjust rates for inflation and to capture part of the efficiency obtained by the companies as a result of the market growth observed in the period.

In 2016 and 2017 the National Electricity Regulatory Agency (“Aneel") ratified the 4th Cycle of the Periodical Rate Reviews (“4CRTP”) of six of the nine subsidiaries of Energisa S/A. The other distribution companies' rate review processes will be completed in April 2018 (EMT, EMS and ESE).

The effects for consumers deriving from the latest adjustment process and rate review of each Energisa Group distribution company in 2017 and 2018 were as follows:

Tariff Events - Average Effects

Distribution company % Tariff Events Effective date
Caiuá + 2.13 Annual Adjustment 07/12/2017
EEB - 10.32 Annual Adjustment 07/12/2017
EDEVP - 1.46 Annual Adjustment 07/12/2017
CNEE - 5.52 Annual Adjustment 07/12/2017
CFLO - 0.60 Annual Adjustment 07/12/2017
Energisa Paraíba + 18.21 4CRTP 08/28/2017
Energisa Mato Grosso + 11.53 4CRTP 04/08/2018
Energisa Mato Grosso do Sul + 9.87 4CRTP 04/08/2018
Energisa Sergipe + 11.30 4CRTP 04/22/2018
Energisa Minas Gerais + 0.76 Annual Adjustment 06/22/2017
Energisa Nova Friburgo - 4.32 Annual Adjustment 06/22/2017
Energisa Tocantins + 6.02 Annual Adjustment 07/04/2017

By way of Resolution 6318, on April 25, 2017 the National Electricity Regulatory Agency (“Aneel") approved the grouping of the CFLO, CNEE, EDEVP, EEB and CAIUA concession areas into a single concession. This concession grouping process was completed on June 30, 2017, when CAIUA had its name changed to Energisa Sul-Sudeste – Distribuidora de Energia S/A (“ESS”) and into the distribution companies CFLO, CNEE, EDVEP and EEB were merged into it.

Regulatory Remuneration Base

The process of valuing assets of the regulatory remuneration base uses the VNR - New Replacement Value, which denotes the value at current market prices of an identical, similar or equivalent asset subject to replacement, which provide the same services and have the same capacity as the existing asset, including all the expenses necessary to install it.

The Regulatory remuneration base consists of the values of the following items:

  1. Property Plant and Equipment in Service (AIS)
  • Land
  • Buildings, civil works and improvements
  • Machinery and equipment
  1. Intangible Assets - Easements
  2. Operations Warehouse
  3. Special Obligations

The net remuneration bases (BRL) of Energisa Group‘s distribution companies and the dates of the next Rate Reviews (RT) are as follows:

Net Remuneration Base (BRL) - Amounts in R$ million

Prices at the Rate Review date

Distribution company 1st Cycle 2nd Cycle 3rd Cycle 4th Cycle
Energisa Sul-Sudeste 203.1 296.4 320.3 491.5
Energisa Minas Gerais 148.6 170.8 218.3 308.0
Energisa Nova Friburgo 42.4 56.5  69.2 95.0
Energisa Tocantins 179.0 238.9  257.1 596.2
Energisa Borborema 32.6 41.0 67.0 117.7
Energisa Paraíba 370.1 508.2 827.3 1,318.4
Energisa Sergipe 233.0 328.6 497.6 797.3
Energisa Mato Grosso 490.8 1,032.8 1,693.5 3,459.8
Energisa Mato Grosso do Sul 600.3 835.7 1,152.6 1,864.5
Total 2,299.9 3,508.9 5,102.9 8,251.1
WACC 17.07 %  15.08 % 11.36 % 12.26 %

Dates and technical notes of the rate reviews

1st to 5th Cycle

Distribution company 1st Cycle 2nd Cycle(2) 3rd Cycle(3) 4th Cycle(4) 5th Cycle(1)
Energisa Sul-Sudeste may/04 may/08 may/12 may/16 may/21
Energisa Minas Gerais jun/04 jun/08 jun/12 jun/16 jun/21
Energisa Nova Friburgo jun/04 jun/08 jun/12 jun/16 jun/21
Energisa Tocantins jul/04 jul/08 jul/12 jul/16(5) jul/20
Energisa Borborema feb/05 feb/09 feb/13 feb/17 feb/21
Energisa Paraíba ago/05 ago/09 ago/13 ago/17 ago/21
Energisa Sergipe apr/03 apr/08 apr/13 apr/18 apr/23
Energisa Mato Grosso apr/03 apr/08 apr/13 apr/18 apr/23
Energisa Mato Grosso do Sul apr/03 apr/08 apr/13 apr/18 apr/23

WACC - Before tax
(1) BRL not ratified by ANEEL, distribution companies have not yet had the rate review in the cycle. 
(2) Technical notes of the distribution companies of the 2nd Cycle Rate Review.
(3) Technical notes of the distribution companies of the 3rd Cycle Rate Review.
(4) Technical notes of the distribution companies of the 4th Cycle Rate Review.
(5) On July 27, 2017, Aneel permanently ratified 4CRTP.

Rate Reviews in 2016 and 2017

In 2016 and 2017 the National Electricity Regulatory Agency ("Aneel") approved the 4th Cycle of Periodical Rate Reviews ("4CRT") of six subsidiaries of Energisa S/A: Energisa Minas Gerais, Energisa Nova Friburgo, Energisa Borborema, Energisa Paraíba, Energisa Tocantins and Energisa Sul-Sudeste (former Caiuá, Vale Paranapanema, Bragantina, Nacional e Força and Luz do Oeste).

The remaining distribution companies will enter the 4th Cycle in April 2018 (Energisa Mato Grosso, Energisa Mato Grosso do Sul and Energisa Sergipe).

The tariff revisions which took place in 2016 and 2017 resulted in an increase in Parcel B of 4.1% over the previous date (D-1) in the rate review applied, reaching R$ 3,836.0 million. The growth in Parcel B for companies entering the 4th Cycle was primarily influenced by the intensification and rate recognition of the investments performed.

Parcel B

(R$ million)

Distribution company DRA (1) DRP (2) Change
(R$ million)
Change 
(%)
Case
Review
Energisa Minas Gerais 210.1 212.2 2.1 + 1.0  Annual Adjustment
Energisa Nova Friburgo 45.4 45.7 0.3 + 0.7 Annual Adjustment
Energisa Sergipe 371.9  394.4 22.5 + 6.1 4CRTP
Energisa Borborema 75.9 74.8 - 1.1 - 1.4 Annual Adjustment
Energisa Paraíba 566.8 633.5 66.7 + 11.7 4CRTP
Energisa Mato Grosso 1,012.3 1,374.5 362.2 + 35.8 4CRTP
Energisa Mato Grosso do Sul 667.6 826.8 158.2 + 23.8 4CRTP
Energisa Tocantins 459.5 456.3 - 3.2 - 0.7 Annual Adjustment
Energisa Sul-Sudeste 359.4 361.7 2.3 + 0.6 4CRTP
Total 3,768.9 4,379.9 611.0 + 16.2  

(1) DRA - Previous Reference Date: defined as the date the last rate process ratified by Aneel is effective from, be it an adjustment or rate review, which includes the costs incurred and revenue earned in the twelve months relating to the rate process.
(2) DRP - Processing Reference Date: the DRP is defined as the date the rate process under analysis to be ratified by Aneel is effective from, be it an adjustment or rate review, which includes the costs and revenue projected for the twelve months relating to the rate process.

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