Deregulated market allows New York generators big profits

By Yonkers Tribune


NFPA 70e Training

Our customized live online or in‑person group training can be delivered to your staff at your location.

  • Live Online
  • 6 hours Instructor-led
  • Group Training Available
Regular Price:
$199
Coupon Price:
$149
Reserve Your Seat Today
Assemblymember Richard Brodsky (D-Westchester), Chairman of the Assembly Committee on Corporations, Authorities, and Commissions and Robert McCullough, Managing Partner of McCullough Research, an expert on electric markets in New York State, released additional data that further quantifies New YorkÂ’s dangerously unfair electric pricing and the huge windfall profits that electricity generators annually take from the pockets of New York state taxpayers.

Assemblymember Brodsky and Robert McCullough previously released a report showing that $2.2 billion annually was being charged unnecessarily to rate payers because of a process implemented by a private independent group, New York Independent System Operator. That process requires utilities to pay the highest prices for electricity instead of the lowest.

The data released shows the amount and percentage of these profits that the 15 electric generators are receiving in the market.

“The annual profit, the annual rate of return of investment that each of these generators receives ranges from no less than 31% to as high as 186%,” said Assemblyman Richard Brodsky. “These are unconscionable numbers. No other industry has a profit margin averaging anything near these numbers annually. The only reasons for this are the policies of the ISO. This must change.”

“A combination of high fuel costs and non-economic bidding practices at the New York In-dependent System Operator made 2008 a very profitable year for generators in New York,” said Robert McCullough.

As Chair of the Assembly Committee on Corporations, Authorities, and Commissions, Assemblyman Brodsky has been investigating the Electricity Market in New York State for the past year. Currently, legislation sponsored by Assemblyman Brodsky abolishes the market clearing price mechanism. The Committee has also held hearings on the issue.

Profit percentages are determined by comparing the capital investment made by the plantÂ’s owners to the annual revenue it generates, after all costs are subtracted. The Report sets forth the return on equity for each of the 15 plants. Given the debt structure of these generating companies it is much more likely that the equity is 50%, not 100%, but both calculations are made.

Related News

New York and New England Need More Clean Energy. Is Hydropower From Canada the Best Way to Get it?

Canadian Hydropower Transmission delivers HVDC clean energy via New England Clean Energy Connect and Champlain Hudson Power Express, linking HydroQuébec to Maine and New York grids for renewable energy, decarbonization, and lower wholesale electricity rates.

 

Key Points

HVDC delivery of HydroQuébec power to New England and New York via NECEC and CHPE, cutting emissions and costs.

✅ 1,200 MW via NECEC; 1,000 MW via CHPE.

✅ HVDC routes: 145-mile NECEC and 333-mile CHPE.

✅ Debates: land impacts, climate justice, wholesale rates.

 

As the sole residents of unorganized territory T5 R7 deep within Maine's North Woods, Duane Hanson and his wife, Sally Kwan, have watched the land around them—known for its natural beauty, diverse wildlife and recreational fishing—transformed by decades of development. 

But what troubles them most is what could happen in the next few months. State and corporate officials are pushing for construction of a 53-mile-long power line corridor cutting right through the woods and abutting the wild lands surrounding Hanson's property. 

If its proponents succeed, Hanson fears the corridor may represent the beginning of the end of his ability to live "off the land" away from the noise of technology-obsessed modern society. Soon, that noise may be in his backyard. 

"I moved here to be in the pristine wilderness," said Hanson.
 
With his life in what he considers the last "wild" place left on the East Coast on the line, the stakes have never felt higher to Hanson—and many across New England, as well.

The corridor is part of the New England Clean Energy Connect, one of two major and highly controversial transmission line projects meant to deliver Canadian hydropower from the government-owned utility HydroQuébec, in a province that has closed the door on nuclear power, to New England electricity consumers. 

As New England states rush to green their electric grids and combat the accelerating climate crisis, the simultaneous push from Canada to expand the market for hydroelectric power from its vast water resources, including Manitoba's clean energy, has offered these states a critical lifeline at just the right moment. 

The other big hydropower transmission line project will deliver 1,000 megawatts of power, or enough to serve approximately one million residential customers, to the New York City metropolitan area, which includes the city, Long Island, and parts of the Hudson Valley, New Jersey, Connecticut and Pennsylvania. 

The 333-mile-long Champlain Hudson Power Express project will consist of two high voltage direct current cables running underground and underwater from Canada, beneath Lake Champlain and the Hudson River, to Astoria, Queens. 

There, the Champlain Hudson project will interconnect to a sector of the New York electricity grid where city and corporate officials say the hydropower supplied can help reduce the fossil fuels that currently comprise significantly more of the base load than in other parts of the state. Though New York has yet to finalize a contract with HydroQuébec over its hydropower purchase, developers plan to start construction on the $2.2 billion project in 2021 and say it will be operational in 2025. 

The New England project consists of 145 miles of new HVDC transmission line that will run largely above ground from the Canadian border, through Maine to Massachusetts. The $1 billion project, funded by Massachusetts electricity consumers, is expected to deliver 1,200 megawatts of clean energy to the New England energy grid, becoming the region's largest clean energy source. 

Central Maine Power, which will construct the Maine transmission corridor, says the project will decrease wholesale electric rates and create thousands of jobs. Company officials expect to receive all necessary permits and begin construction by the year's end, with the project completed and in service by 2020. 

With only months until developers start making both projects on-the-ground realities, they have seized public attention within, and beyond, their regions. 

Hanson is one among many concerned New England and New York residents who've joined the ranks of environmental activists in a contentious battle with public and corporate officials over the place of Canadian hydropower in their states' clean energy futures. 

Officials and transmission line proponents say importing Canadian hydropower offers an immediate and feasible way to help decarbonize electricity portfolios in New York and New England and to address existing transmission constraints that limit cross-border flows today, supporting their broader efforts to combat climate change. 

But some environmental activists say hydropower has a significant carbon footprint of its own. They fear the projects will make states look "greener" at the expense of the local environment, Indigenous communities, and ultimately, the climate. 

"We're talking about the most environmentally and economically just pathway" to decarbonization, said Annel Hernandez, associate director of the NYC Environmental Justice Alliance. "Canadian hydro is not going to provide that." 

To that end, environmental groups opposing Canadian hydropower say New York and New England should seize the moment to expedite local development of wind and solar power. 

Paul Gallay, president of the nonprofit environmental organization Riverkeeper—which withdrew its initial support for the Champlain Hudson Power Express last November— believes New York has the capacity to develop enough in-state renewable energy sources to meet its clean energy goals, without the new transmission line. 

Yet New York City's analysis shows clearly that Canadian hydropower is critical for its clean energy strategy, said Dan Zarrilli, director of OneNYC and New York City's chief climate policy adviser. 

"We need every bit of clean energy we can get our hands on," he said, to meet the city's goal of carbon neutrality by 2050 and help achieve the state's clean energy mandates. 

Removing Canadian hydropower from the equation, said Zarilli, would commit the city to the "unacceptable outcome" of burning more gas. The city's marginalized communities would likely suffer most from the resulting air pollution and associated health impacts. 

While the two camps debate Canadian hydropower's carbon footprint and what climate justice requires, this much is clear: When it comes to pursuing a zero-carbon future, there are no easy answers. 

Hydropower's Carbon Footprint
Many people take for granted that because hydropower production doesn't involve burning fossil fuels, it's a carbon-neutral endeavor. But that's not always the case, depending on where hydropower is sourced. 

Large-scale hydropower projects often involve the creation of hydroelectric dams and reservoirs, and, in some cases, repowering existing dams to generate clean electricity. The release and flow of water from the reservoir through the dam provides the energy necessary to generate hydropower, which long-distance power lines, or transmission lines, carry to its intended destination—in this case, New England and New York. 

The initial process of flooding land to create a hydroelectric reservoir can have a sizable carbon footprint, especially in heavily vegetated areas. It causes the vegetation and soil underwater to decompose, releasing carbon dioxide and methane—a greenhouse gas 84 times more potent over a 20-year period than carbon dioxide. 

Hydropower accounts for 60 percent of Canada's electricity generation, and HydroQuébec has planned to increase capacity to 37,000 MW in 2021, with the nation second only to China in the percentage of the world's total hydroelectricity it generates. By contrast, hydropower only accounts for seven percent of U.S. utility-scale electricity generation, making it a foreign concept to many Americans. 

As New England works to introduce substantial amounts of Canadian hydropower to its electricity grid, hydropower proponents are promoting it as a prime source for clean electricity, and new NB Power agreements are expanding regional transfers within Canada as well. 

Last fall, Central Maine Power formed its own political action committee, Clean Energy Matters, to advance the New England hydropower project. Together with HydroQuébec, the Maine utility has spent nearly $17 million campaigning for the project this year. 

 

Related News

View more

TCS Partners with Schneider Electric Marathon de Paris to Boost AI and Technology

TCS AI Partnership Paris Marathon integrates predictive analytics, digital twin simulations, real-time runner tracking, and sustainability solutions to elevate logistics, athlete performance, and immersive spectator engagement across the Schneider Electric Marathon de Paris ecosystem.

 

Key Points

AI-driven TCS partnership enhancing Paris logistics, performance, engagement, and sustainability for three years.

✅ Predictive analytics and digital twins optimize race-day ops

✅ Real-time runner tracking and health insights

✅ Sustainable resource management and waste reduction

 

Tata Consultancy Services (TCS) has officially become the AI & Technology Partner for the Schneider Electric Marathon de Paris, marking the start of a three-year collaboration with one of the world’s most prestigious running events. This partnership, announced on April 1, 2025, aims to revolutionize the marathon experience by integrating cutting-edge technology, artificial intelligence (AI), and data analytics, and modern AI data centers to power scalable capabilities, enhancing both the runner's journey and the spectator experience.

The Schneider Electric Marathon de Paris, which attracts over 55,000 runners from across the globe, is a renowned event that not only challenges athletes but also captivates a worldwide audience. As the Official AI & Technology Partner, TCS is set to bring its deep expertise in AI, digital innovation, and data-driven insights to this iconic event, drawing on adjacent domains such as substation automation training to strengthen operations. With more than 30 years of presence in France and its significant partnerships with French corporations, TCS is uniquely positioned to merge its global technology capabilities with local knowledge, thus adding immense value to this prestigious marathon.

The collaboration will primarily focus on enhancing the race logistics, improving athlete performance, and creating a personalized experience for both runners and spectators. Using advanced AI tools, predictive analytics, and digital twin technologies, TCS will streamline various aspects of the event. For example, AI-powered predictive models, reflecting progress recognized by European electricity prediction specialists in forecasting, will be used to track and monitor runners in real-time, providing insights into their performance and well-being during the race. Additionally, the implementation of digital twin technology will enable TCS to create accurate virtual models of the event, improving logistics and supporting better decision-making.

One of the key goals of the partnership is to improve the sustainability of the marathon. By utilizing advanced AI solutions, including AI for energy savings approaches, TCS will help optimize race-day operations, ensuring efficient management of resources, reducing waste, and minimizing environmental impact. This aligns with the growing trend of incorporating sustainability into large-scale events, ensuring that such iconic marathons not only provide an exceptional experience for participants but also contribute to global environmental goals.

TCS’s PacePort™ innovation hub in Paris will play a pivotal role in the collaboration. This innovation center will serve as the testing ground for new AI-powered solutions and tools aimed at improving runner performance and creating a more engaging race experience. Early priorities for the project include the development of personalized AI-based training programs for runners, real-time tracking systems for athlete health monitoring, and advanced analytics to support better training and recovery strategies, drawing on insights from EU smart meter analytics to inform personalization.

Additionally, TCS will introduce new technologies to enhance spectator engagement. Digital experiences, such as virtual race tracking and immersive content, will bring spectators closer to the event, even if they are not physically present at the marathon. This will allow fans worldwide to engage with the race in more interactive ways, enhancing the global reach and excitement surrounding the event.

TCS’s role in the Schneider Electric Marathon de Paris is part of its broader strategy to leverage technology in the realm of sports. The company already supports several major global marathons, including those in New York, London, where projects like the London electricity tunnel showcase infrastructure innovation, and Mumbai, contributing to their operational success and social impact. In fact, marathons supported by TCS raised nearly $280 million for charitable causes in 2024 alone, demonstrating the company’s commitment to blending innovation with social responsibility.

The strategic partnership with the Paris marathon also underscores TCS’s continued commitment to its French operations, and aligns with Schneider Electric’s Notre Dame restoration initiatives that highlight local impact, reinforcing its role as a leader in AI and digital technology. Through this collaboration, TCS aims to not only support the marathon’s logistical and technological needs but also to contribute to the broader development of digital sports experiences.

This partnership promises to deliver a more dynamic, sustainable, and engaging marathon experience, benefiting runners, spectators, and the broader event ecosystem. With TCS’s cutting-edge technology and commitment to enhancing the marathon, the Schneider Electric Marathon de Paris is poised to set new standards for global sports events, blending athletic performance with digital innovation in unprecedented ways.

 

Related News

View more

Honda Accelerates Electric Vehicle Push with Massive Investment in Ontario

Honda Ontario EV Investment accelerates electric vehicle manufacturing in Canada, adding a battery plant, EV assembly capacity, clean energy supply chains, government subsidies, and thousands of jobs to expand North American production and innovation.

 

Key Points

The Honda Ontario EV Investment is a $18.4B plan for EV assembly and battery production, jobs, and clean growth.

✅ $18.4B for EV assembly and large-scale battery production

✅ Thousands of Ontario manufacturing jobs and supply chain growth

✅ Backed by Canadian subsidies to accelerate clean transportation

 

The automotive industry in Ontario is on the verge of a significant transformation amid an EV jobs boom across the province, as Honda announces plans to build a new electric vehicle (EV) assembly plant and a large-scale battery production facility in the province. According to several sources, Honda is prepared to invest an estimated $18.4 billion in this initiative, signalling a major commitment to accelerating the automaker's shift towards electrification.


Expanding Ontario's EV Ecosystem

This exciting new investment from Honda builds upon the growing momentum of electric vehicle development in Ontario. The province is already home to a burgeoning EV manufacturing ecosystem, with automakers like Stellantis and General Motors investing heavily in retooling existing plants for EV production, including GM's $1B Ontario EV plant in the province. Honda's new facilities will significantly expand Ontario's role in the North American electric vehicle market.


Canadian Government Supports Clean Vehicles

The Canadian government has been actively encouraging the transition to cleaner transportation by offering generous subsidies to bolster EV manufacturing and adoption, exemplified by the Ford Oakville upgrade that received $500M in support. These incentives have been instrumental in attracting major investments from automotive giants like Honda and solidifying Canada's position as a global leader in EV technology.


Thousands of New Jobs

Honda's investment is not only excellent news for the Canadian economy but also promises to create thousands of new jobs in Ontario, boosting the province's manufacturing sector. The presence of a significant EV and battery production hub will attract a skilled workforce, as seen with a Niagara Region battery plant that is bolstering the region's EV future, and likely lead to the creation of related businesses and industries that support the EV supply chain.


Details of the Plan

While the specific location of the proposed Honda plants has not yet been confirmed, sources indicate that the facilities will likely be built in Southwestern Ontario, near Ford's Oakville EV program and other established sites. Honda's existing assembly plant in Alliston will be converted to produce hybrid models as part of the company's broader plan to electrify its lineup.


Honda's Global EV Ambitions

This substantial investment in Canada aligns with Honda's global commitment to electrifying its vehicle offerings. The company has set ambitious goals to phase out traditional gasoline-powered cars and achieve net-zero carbon emissions by 2040.  Honda aims to expand EV production in North America to meet growing consumer demand and deepen Canada-U.S. collaboration in the EV industry.


The Future of Transportation

Honda's announcement signifies a turning point for the automotive landscape in Canada. This major investment reinforces the shift toward electric vehicles as an inevitable future, with EV assembly deals putting Canada in the race as well.  The move highlights Canada's dedication to fostering a sustainable, clean-energy economy while establishing a robust automotive manufacturing industry for the 21st century.

 

Related News

View more

Investigation reveals power company 'gamed' $100M from Ontario's electricity system

Goreway Power Station Overbilling exposed by Ontario Energy Board shows IESO oversight failures, GCG gaming, and $100M in inappropriate payments at the Brampton natural gas plant, penalized with fines and repayments impacting Ontario ratepayers.

 

Key Points

Goreway exploited IESO GCG flaws, causing about $100M in improper payouts and fines.

✅ OEB probe flagged $89M in ineligible start-up O&M charges

✅ IESO fined Goreway $10M; majority of excess costs recovered

✅ Audit found $200M in overbilling across nine generators

 

Hydro customers shelled out about $100 million in "inappropriate" payments to a natural gas plant that exploited flaws in how Ontario manages its private electricity generators, according to the Ontario Energy Board.

The company operating the Goreway Power Station in Brampton "gamed" the system for at least three years, according to an investigation by the provincial energy regulator. 

The investigation also delivers stinging criticism of the provincial government's Independent Electricity System Operator (IESO), slamming it for a lack of oversight. The probe by the Ontario Energy Board's market surveillance panel was completed nearly a year ago, but was only made public in November because it was buried on its website without a news release. CBC News is the first media outlet to report on the investigation.  

The excess payments to Goreway Power Station included:

  • $89 million in ineligible expenses billed as the costs of firing up power production. 
  • $5.6 million paid in three months from a flaw in how IESO calculated top-ups for the company committing to generate power a day in advance.   
  • Of $11.2 million paid to compensate the company for IESO ordering it to start or stop generating power, the investigation concluded "a substantial portion ... was the result of gaming."  

Most privately-owned natural gas-fired plants in the province do not generate electricity constantly, but start and stop production in response to fluctuating market demand, even as the energy minister has requested an halt to natural gas generation across the grid.  IESO pays them a premium for the costs of firing up production, through what it calls "generation cost guarantee" programs. 

But the investigation found IESO did little checking into the details of Goreway Power Station's billings. 

Goreway Power Station, located near Highway 407 in Brampton, Ont., is an 875 megawatt natural gas power plant. (Goreway)

"Conservatively, at least $89 million of Goreway's submissions were clearly ineligible by any reasonable measure," concludes the report.

"Goreway routinely submitted what were obviously inappropriate expenses to be reimbursed by the IESO, and ultimately borne by Ontario ratepayers,"

The investigation panel found an "extraordinary pattern" to these billings by Goreway Power Station, suggesting the IESO should have caught on sooner. The company submitted more than $100 million in start-up operating and maintenance costs during the three-year period investigated — more than all other gas-fired generators in the province combined. The company's costs per start-up were more than double the next most expensive power generator. 

"Goreway repeatedly exploited defects in the GCG (generation cost guarantee) program, and in doing so received at least $89 million in gamed GCG payments." 

Company fined $10M

The investigation covered a three-year period from when Goreway Power Station began generating power in June 2009. Investigators said that delays in releasing documents slowed down their probe, and they only obtained all the records they needed in April 2016.

The investigating panel does not have the power to impose penalties on companies it found broke the rules. 

The IESO fined Goreway Power Station $10 million. The company has also repaid IESO "a substantial portion" of the excess payments it received during its first six years of operating, but the exact figure is blacked out in the investigation report that was made public. 

The control room from which the provincial government's Independent Electricity System Operator manages Ontario's power supply. The agency is also responsible for managing contracts with private power producers.(IESO)

"Goreway does not agree with many of the draft report's findings and conclusions, including any suggestion that Goreway engaged in gaming or that it deliberately misled the IESO," writes lawyer George Vegh on behalf of the company in a response to the investigation report, dated Aug. 1.

"Goreway has implemented initiatives designed to ensure that compliance is a chief operating principle."     

The power station, located near Highway 407 in Brampton, is a joint venture between Toyota Tsusho Corp. and JERA Co. Inc. During the period under scrutiny, the project was run by Toyota Tsusho and Chubu Electric Power Inc., both headquartered in Japan. 

Investigators fear 'same situation' exists today

The report blames the provincially-controlled IESO for creating a system with defects that allowed the over-billing. 

"Goreway was able to — and repeatedly did — exploit these defects," says the investigation report. It goes on to explain the flaws "have created opportunities for exploitation, to the serious financial disadvantage of Ontario's ratepayers," even as greening Ontario's grid could entail massive costs.

The investigation suggests IESO hasn't made adequate changes to ensure it won't happen again, at a time when an analysis of a dirtier grid is raising concerns.   

"Goreway stands as a clear example of how generators are able to exploit the generation costs guarantee regime," says the report.

"The Panel is concerned that the same situation remains in place today." 

PC energy critic Todd Smith raised CBC News' report on the Goreway Power Station in Tuesday's question period. (Ontario Legislature)

After CBC News broke the story Tuesday, the provincial government was forced to respond in question period, amid a broader push for new gas plants to boost electricity production. 

"Here we have yet another gas plant scandal in Peel region that's costing electricity customers over $100 million," said PC energy critic Todd Smith. He slammed "the incompetence of a government that once again failed to look out for electricity customers." 

Economic Development Minister Brad Duguid said: "There is no excuse for any company in this province to ever game the system."

Nine companies overbilled $200M: audit 

The IESO found out about the overbilling "some time ago," said Duguid.

"They fully investigated, they've recovered most of the cost, they delivered a $10 million fine — the biggest fine on record."

The program that Goreway exploited became the subject of an audit that the IESO launched in 2011. The agency uncovered $200 million in ineligible billings by nine power producers, wrote the IESO vice president for policy Terry Young in an email to CBC News.

The IESO has recovered up to 85 per cent of those ineligible costs, Young noted.

Reforms to the design of the the program have removed the potential for overpayments and made it more efficient, he said, even as Ontario weighs embracing clean power more broadly. Last year, its total annual costs dropped to $23 million, down from $61 million in 2014.

 

Related News

View more

Daimler Details Gigantic Scope of Its Electrification Plan

Daimler Electric Strategy drives EV adoption with global battery factories, Mercedes-Benz electrified models, battery cells procurement, and major investments spanning vans, buses, trucks, and production capacity across Europe, Asia, and the USA.

 

Key Points

Daimler Electric Strategy is a multi-billion EV roadmap for batteries, factories, and 130 electrified Mercedes models.

✅ Eight battery factories across three continents

✅ EUR 10B for EV lineup; EUR 20B for battery cells

✅ 130 electrified variants plus vans, buses, trucks

 

Throughout 2018, we all witnessed the unprecedented volume of promises for a better future made by the giants of the auto industry. All say they've committed billions so that, within a decade, combustion engines will be on their way out.

The most active of all companies when talking about promises is Volkswagen, which, amid German plant closures, time and time again has said it will do this or that and completely change the meaning of car in the coming years. But there are other planning the same thing, possibly with even vaster resources.

Planning to end the year on a high note, Daimler detailed its plan for the electric future once again on Tuesday, this time making no secret of its gigantic size and scope.

As announced before, Daimler plans to build electric cars, but also manufacture electric batteries for its own and others’ use, and has launched a US energy storage company to support this strategy. These batteries will eventually be produced by Daimler in eight factories on three continents.

Batteries are already rolling off the lines in Kamenz, and a second facility will begin doing so next year. Two more factories will be built in Stuttgart-Untertürkheim, one at the company’s Sindelfingen site, and one each at the sites in Beijing (China), Bangkok (Thailand) and Tuscaloosa (USA).

In all, one billion EUR will be invested in the expansion of the global battery production network, but that is nothing compared to the 10 billion to be poured into the expansion of the Mercedes-Benz car fleet.

On top of that, 20 billion EUR will go towards the purchase of battery cells from producers all around the world, echoing other automakers' battery sourcing strategies worldwide over the next 12 years.

“After investing billions of euros in the development of the electric fleet and the expansion of our global battery network, we are now taking the next step,” said in a statement Dieter Zetsche, Daimler chairman of the board.

“With the purchase of battery cells for more than 20 billion euros, we are systematically pushing forward with the transformation into the electric future of our company.”

By 2022, the carmaker plans to launch 130 electrified variants of its cars, as cheaper, more powerful batteries become available, adding to them electric vans, buses and trucks. That pretty much means all the models and variants sold by Daimler globally will be at least partially powered by electricity.

 

Related News

View more

Brazil tax strategy to bring down fuel, electricity prices seen having limited effects

Brazil ICMS Tax Cap limits state VAT on fuels, natural gas, electricity, communications, and transit, promising short-term price relief amid inflation, with federal compensation to states and potential legal challenges affecting investments and ANP auctions.

 

Key Points

A policy capping state VAT at 17-18 percent on fuels, electricity, and services to temper prices and inflation.

✅ Caps VAT to 17-18% on fuels, power, telecom, transit

✅ Short-term relief; medium-long term impact uncertain

✅ Federal compensation; potential court challenges, investment risk

 

Brazil’s congress approved a bill that limits the ICMS tax rate that state governments can charge on fuels, natural gas, electricity, communications, and public transportation. 

Local lawyers told BNamericas that the measure may reduce fuel and power prices in the short term, similar to Brazil power sector relief loans seen during the pandemic, but it is unlikely to produce any major effects in the medium and long term. 

In most states the ceiling was set at 17% or 18% and the federal government will pay compensation to the states for lost tax revenue until December 31, via reduced payments on debts that states owe the federal government.

The bill will become law once signed by President Jair Bolsonaro, who pushed strongly for the proposal with an eye on his struggling reelection campaign for the October presidential election. Double-digit inflation has turned into a major election issue and fuel and electricity prices have been among the main inflation drivers, as seen in EU energy-driven inflation across the bloc this year. Congress’ approval of the bill is seen by analysts as political victory for the Brazilian leader.

How much difference will it make?

Marcus Francisco, tax specialist and partner at Villemor Amaral Advogados, said that in the formation of fuel and electricity prices there are other factors, including high natural gas prices, that drive increases.

“In the case of fuels, if the barrel of oil [price] increases, automatically the final price for the consumer will go up. For electricity, on the other hand, there are several subsidies and policy choices such as Florida rejecting federal solar incentives that are part of the price and that can increase the rate [paid],” he said. 

There is also a possibility that some states will take the issue to the supreme court since ICMS is a key source of revenue for them, Francisco added.

Tiago Severini, a partner at law firm Vieira Rezende, said the comparison between the revenue impact and the effective price reduction, based on the estimates made by the states and the federal government, seems disproportionate, and, as seen in Europe, rolling back European electricity prices is often tougher than it appears. 

“In other words, a large tax collection impact is generated, which is quite unequal among the different states, for a not so strong price reduction,” he said.

“Due to the lack of clarity regarding the precision of the calculations involved, it’s difficult even to assess the adequacy of the offsets the federal government has been considering, and international cases such as France's new electricity pricing scheme illustrate how complex it can be to align fiscal offsets with regulatory constraints, to cover the cost it would have with the compensation for the states” Severini added.

The compensation ideas that are known so far include hiking other taxes, such as the social contribution on net profits (CSLL) that is paid by oil and gas firms focused on exploration and production.

“This can generate severe adverse effects, such as legal disputes, reduced investments in the country, and reduced attractiveness of the new auctions by [sector regulator] ANP, and costly interventions like the Texas electricity market bailout after extreme weather events,” Severini said. 

 

Related News

View more

Sign Up for Electricity Forum’s Newsletter

Stay informed with our FREE Newsletter — get the latest news, breakthrough technologies, and expert insights, delivered straight to your inbox.

Electricity Today T&D Magazine Subscribe for FREE

Stay informed with the latest T&D policies and technologies.
  • Timely insights from industry experts
  • Practical solutions T&D engineers
  • Free access to every issue

Live Online & In-person Group Training

Advantages To Instructor-Led Training – Instructor-Led Course, Customized Training, Multiple Locations, Economical, CEU Credits, Course Discounts.

Request For Quotation

Whether you would prefer Live Online or In-Person instruction, our electrical training courses can be tailored to meet your company's specific requirements and delivered to your employees in one location or at various locations.