Brazil goes to extremes to fend off energy crisis Updated: Wed, Aug 01 1:03 PM EDT

By Shasta Darlington

RIO DE JANEIRO, Brazil (Reuters) - Two months into an emergency electricity rationing plan, Brazilians are going to extremes to fend off the country's worst energy crisis in decades -- and avoid harsh power cuts and fines.

Roberto Fernandes and his wife have resorted to taking their baths in a bucket with water heated on the stove in order to avoid the power-guzzling electric shower heads that were once so popular in Brazil.

"It's kind of tough in the winter, but we've really cut our electricity consumption this way," the 46-year-old accounting assistant said.

The crisis was sparked by a severe drought that dried up reservoirs at hydroelectric plants which provide about 90 percent of the energy in Latin America's biggest country. Poor government planning and lack of investments worsened matters.

Now, movie theaters have turned off air conditioning, restaurants have resorted to candles and cybersurfers have abandoned the electronic highway in order to avoid fines and power cuts that will be dealt out to those who exceed strict energy consumption targets.

As a result Brazil has not only met, it has slightly exceeded targets in the first two months of a plan aimed at cutting energy use by an average 20 percent, the government said on Wednesday.

"Things are even a little better than we had hoped due to strong support from the population," a spokesman for the National Grid Operator (ONS) told Reuters while the interministerial energy council met behind closed doors.

In June and July, Brazilians in the regions included in the emergency plan cut electricity use by an average 20.4 percent. In July alone the savings were even better at an average 21.4 percent. Reservoir levels also ended the two-month period higher than initially forecast, the spokesman said.

AN AMAZING FEAT

"It's an amazing feat," said Victor Galliano, Latin America utilities analyst at BBVA Securities in New York. "How swiftly they've been able to bring down consumption has been one of the successes of the whole crisis."

But for many Brazilian families and companies there was no other option. Big consumers who fail to meet targets will be straddled with fines or power cuts, particularly stinging measures at a time when economic output is slowing and unemployment is on the rise due not only to the energy crisis but to turbulence in neighboring Argentina.

Residential consumers were the biggest savers, cutting consumption by over 30 percent on average and offsetting shortcomings in the industrial and commercial sectors.

In a bid to avoid highly unpopular rolling blackouts ahead of 2002 presidential elections, the government opted for this plan that also awards energy conservers with discounts in their electricity bills.

"The plan may be less disruptive on the economy, but its fairly harsh on the pockets," said an industry expert at Dresdner Kleinwort Wasserstein (DKW) in Brazil.

Still, analysts said that at this rate, Brazil will be able to avoid blackouts through the crucial August to October period when rains should resume and new energy supply comes online. They said even with the energy savings, rationing may be extended well into next year to ensure reservoirs recover.

The plan has been disastrous for power companies who have seen their revenues drop off 20 percent and their stocks fall by up to 50 percent, and it has sparked a feud between energy distributors and generators over who will foot the bill.

Distributors are demanding that generators, which are mainly federal or state-run companies, compensate them for lost revenue as stipulated by an little-known contractual clause known as Annex V. The government is stalling, but analysts expect some kind of a deal will be cut.

"I would see some sort of a negotiated situation," said the DKW analyst who added that neither sector could shoulder the onus alone without fear of collapsing.

http://news.excite.com/printstory/news/r/010801/13/energy-brazil

-- Martin Thompson (mthom1927@aol.com), August 02, 2001

Answers

With the huge cut in industrial production Brazil took in the very first month--June--of this rationing, I don't see how they can possibly extend it into next year and remain a viable economic entity.

-- JackW (jpayne@webtv.net), August 02, 2001.

Now that they have chopped down their rain forests I'll betcha they ain't got no wood to burn for power either.

-- Buck (bigbuck@trailways.net), August 02, 2001.