International Comparisons of Electricity Tariffs - A Critical Analysis of Relevant Factors.

Abstract

Due to the importance of electrical energy, pressure groups exert their influence on governments and regulators seeking price rules that will afford enterprises a competitive advantage. As regards civil society, low electricity prices carry a political and electoral appeal, and they also help governments combat problems related to inflation. Thus, these pressure groups have often created rankings to compare international rates, highlighting that Brazilian tariffs are among the highest in the world. The media has obviously published such studies, causing political embarrassment for the local governments.This article presents a comprehensive discussion of the various factors that may distort the results of comparisons. Yet, these results cannot be correctly interpreted without taking into account the peculiarities and complexities of each country, which are quite distinct from each other and prompt different costs and, consequently, different rates. This paper also discusses how the rates are affected by many factors, namely, natural resources, regulations, environmental issues, taxation, cost of capital, subsidies and incentives, the size, profile and concentration of the market, the quality and safety required, the geography and technological availability. Examples are also presented to illustrate the importance of these factors to set the rates in a specific country.