Mexican steelmaker wins dispute against power rate hike in Brazil

Rômulo Mariani
BNamericas
09/03/2018

Steelmaker GV do Brasil, a subsidiary of Mexican group Simec, has obtained a legal injunction halting an increase in electric power rates designed to compensate energy transmission companies in Brazil, local legal office Souto Correa told BNamericas.

In the suit, the company, which owns a plant in São Paulo state, claimed the rise in electricity bills is undue and has harmed its industrial activities.

The increase in power rates was the solution found by the federal government to settle a 64bn­ real (US$20bn) debt with power transmission firms that had their concession contracts preemptively renewed in 2013 after the publication of provisional measure MP 579, which introduced cuts in power rates.

At the time, the government agreed to pay an estimated 32bn reais needed to conclude the remuneration of the concessionaires’ assets under the original contract, as a compensation for the reduction in energy prices.

However, after three years without receiving any payments, the transmission companies claimed in 2016 that the debt had topped 60bn reais, considering monetary corrections and other adjustments.

“That’s when the government edited an administrative rule saying this bill would be transferred to electric power rates,” Rômulo Mariani, a lawyer for Souto Correa, explained in a telephone interview with BNamericas.

Since then, various large energy consumers have filed lawsuits against the government’s decision, but only managed to obtain partia! injunctions against it, impeding the transfer of just 15% (9.6bn reais) of the total amount to power bills.

A different judge, however, has now granted a full injunction to the steelmaker. “He fully backed us to halt 100% of the power rate increase on GV’s bills,” Mariani said.

An appeal filed by the Brazilian government against the decision is currently being studied by the judge.