Steel company wins injunction in fight over electricity price hikes

Rômulo Mariani
Latin Lawyer
04/04/2018

Souto, Correa, Cesa, Lummertz & Amaral Advogados has helped Mexican steel company Simec obtain a strategic injunction against the Brazilian government and electricity regulator ANEEL, which exempts it from paying a tariff controversially levied by the government in 2016.

The injunction could set a precedent for a series of similar law suits stemming from increased charges levied on electricity consumers by the government.

The Brazilian government and ANEEL are represented by Brazil’s general attorney’s office. ASBZ Advogados is advising industry trade group Abrate, which represents all 15 main transmission companies in Brazil.

A federal court in Brasília issued the injunction in favour of Simec on 19 December. It is the first decision suspending all payments due under the electricity tariff hikes. Other similar lawsuits brought by companies and associations ordered only partial reductions in payments. Simec’s case is one of a series of lawsuits brought by electricity consumers, which include companies and industry associations, disputing the tariffs.

The consumers claim a 64 billion reais (US$19.3 billion) bill owed by the government to transmission companies was wrongly transferred to them through increases in electricity tariffs.

The bill resulted from a 2013 agreement between the government and transmission companies to renew concessions. The government agreed to compensate the companies in order for them to agree to new terms for the renewal of their concessions. At the time, the new terms were intended to allow for a decrease in consumer energy bills.

But the government delayed payment of compensation and in 2016 – when Brazil faced a fiscal debt crisis amid the impeachment of President Dilma Rousseff – decided transmission companies would instead receive compensation through electricity tariffs. The measure meant higher electricity prices. Many consumers opposed paying higher bills and disputed the measure.

Simec’s case, the value of which was not disclosed, represents a small fraction of the total amount under dispute. But Souto Correa partner Rômulo Mariani says the injunction may set a precedent for other judicial decisions on the matter. “In the electricity sector it is normal to have a cascade effect and one legal decision can influence the others,” Mariani says. “Also, when a company sees a competitor winning a case, they might be impelled to follow the same direction,” he adds.

The case will now be assessed by a federal court in Brasília. ASBZ Advogados’ partner Daniel Hossni Ribeiro do Valle says the appeal includes a request for the injunction’s suspension while the case is judged. It is understood that all court claims on the subject will be judged by the same appeals court so a uniform ruling is given to all cases.

“We expect the appeals tribunal will cancel this injunction, so consumers will have to pay what they owe to transmission companies,” says ASBZ’s partner Daniel Hossni Ribeiro do Valle.

Although the appeal decision is yet to be scheduled, Valle says he expects it to take place within the next three months.

Counsel to Grupo Simec

Souto, Correa, Cesa, Lummertz & Amaral Advogados

Partners Gustavo Kaercher, Patrícia Lyra, Renata Misoczki and Rômulo Mariani

Counsel to Brazilian government and Agência Nacional de Energia Elétrica (ANEEL)

Government General Attorney’s Office (AGU)

Counsel to Associação Brasileira das Empresas de Transmissão de Energia Elétrica (Abrate)

ASBZ Advogados

Partners Daniel do Valle, Aitan Portela, Rafael Janiques, Giuliana Rosin Santos Abreu and Leonardo Bezerra

Practice area : , Litigation, Energy

Country : Brazil

Industry : Electricity Production and Supply