* Brazil wanted power rate cut of 20 pct
* Gov't reduces rates to 16.7 pct after utility refusals
* CEMIG and CESP keep dams out of program
BRASILIA, Dec 4 The Brazilian government's goal
of cutting electricity rates by a fifth suffered a setback on
Tuesday as several utilities rejected President Dilma Rousseff's
offer to renew expiring hydro concessions early in exchange for
power rate cuts.
Average electricity rates, which are among the world's
highest, will fall 16.7 percent instead of a planned 20 percent
as a result of the renewal refusals, Energy Ministry Executive
Secretary Marcio Zimmerman told reporters in Brasilia.
A hydro concession is a government license to operate a dam
and sell the energy.
The debate over the renewals has pitted the federal
government against investors and utility managers. Rousseff
wants the rate cuts to boost growth in Brazil, the world's
Her opponents say the cuts are too big and will slash
revenue, profit and investment to a level that could cripple the
Federal government-controlled Eletrobras, Latin
America's largest utility, accepted the renewals Monday. The
decision to accept them caused the company's share price to fall
by half since Rousseff announced the plan in September. Company
shares are trading at some of their lowest levels in more than a
The refusals were led by Cia Energetica de Minas Gerais
and Cia Energetica de Sao Paulo,
public-private utilities controlled by the Brazilian state
governments of Minas Gerais and Sao Paulo. The utilities are
more commonly known as CEMIG and CESP.
While CEMIG and CESP agreed to accept early renewals for
part of their dam portfolio, they said could not operate the
rest under the financial terms offered by the government.
When dam rights not included by the utilities in the program
expire, they revert to Brazil's federal government and will be
auctioned to the highest bidder, Zimmerman said.
While the government's effort to get renewals for all hydro
dam concessions expiring by 2017 failed, Brazilian utilities
opted to renew 100 percent of expiring electricity transmission
contracts under the program, Zimmerman said.