Definition of Regulatory Targets for Electricity Default Rate in Brazil: Proposition of a Fuzzy Inference-Based Model

Nivia Maria Celestino, Rodrigo Calili (), Daniel Louzada () and Maria Fatima Almeida
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Nivia Maria Celestino: Postgraduate Programme in Metrology, Pontifical Catholic University of Rio de Janeiro, Rio de Janeiro 22453-900, Brazil
Rodrigo Calili: Postgraduate Programme in Metrology, Pontifical Catholic University of Rio de Janeiro, Rio de Janeiro 22453-900, Brazil
Daniel Louzada: Postgraduate Programme in Metrology, Pontifical Catholic University of Rio de Janeiro, Rio de Janeiro 22453-900, Brazil
Maria Fatima Almeida: Postgraduate Programme in Metrology, Pontifical Catholic University of Rio de Janeiro, Rio de Janeiro 22453-900, Brazil

Energies, 2024, vol. 17, issue 9, 1-26

Abstract: The current electricity default rates in continental countries, such as Brazil, pose risks to the economic stability and investment capabilities of distribution utilities. This situation results in higher electricity tariffs for regular customers. From a regulatory perspective, the key issue regarding this challenge is devising incentive mechanisms that reward distribution utilities for their operational and investment choices, aiming to mitigate or decrease electricity non-payment rates and avoid tariff increases for regular customers. Despite adhering to the principles of incentive regulation, the Brazilian Electricity Regulatory Agency (ANEEL) uses a methodological approach to define regulatory targets for electricity defaults tied to econometric models developed to determine targets to combat electricity non-technical losses (NTLs). This methodology has been widely criticized by electricity distribution utilities and academics because it includes many ad hoc steps and fails to consider the components that capture the specificities and heterogeneity of distribution utilities. This study proposes a fuzzy inference-based model for defining regulatory default targets built independently of the current methodological approach adopted by ANEEL and aligned with the principles of incentive regulation. An empirical study focusing on the residential class of electricity consumption demonstrated that it is possible to adopt a specific methodology for determining regulatory default targets and that the fuzzy inference approach can meet the necessary premises to ensure that the principles of incentive regulation and the establishment of regulatory targets are consistent with the reality of each electricity distribution utility.

Keywords: electricity default; incentive regulation; fuzzy inference system; electricity distribution utilities (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2024
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