Analyst: Paraguay cannot fix electricity tariffs until Itaipú Annex C is renegotiated

Paraguay's state power utility, ANDE, faces significant hurdles in setting long-term fixed electricity tariffs, particularly for energy-intensive industries like the one proposed by British company Atome PLC. An energy sector analyst cautions that ANDE cannot commit to such pricing until the critical renegotiation of Annex C of the Itaipú Treaty is finalized.

The analyst, who requested anonymity due to professional obligations, addressed the ongoing dispute between government officials and ANDE's president, Félix Sosa. Sosa had revealed that the cost of electricity generation in Paraguay is projected to rise gradually to $50 per megawatt-hour (MWh) by 2043. Atome PLC, meanwhile, is seeking a fixed tariff of $30 per MWh for 15 years for its green fertilizer plant in Villeta. The analyst argues that if ANDE's actual generation costs exceed this rate well before the requested period ends, Atome's proposal becomes "technically and financially unviable" for the state company.

A key point of concern is the expiration of the triennial Itaipú tariff this year, with the subsequent pricing yet to be determined. While a 2024 understanding with Brazil suggests the price should align with the cost as per Annex C, the analyst points out that the "Operational Agreement" with Brazil, which grants ANDE preferential access to surplus Itaipú energy at a lower cost, expires at the end of 2026. "Regardless of who wins the elections in Brazil, there will be no continuity of that agreement," the source stated.

Following the expiration of the operational agreement, ANDE would likely face higher tariffs for Itaipú energy, with a similar scenario potentially affecting Yacyretá. The analyst emphasized that neither of these binational tariffs would be fixed for 10 or 15 years, but rather subject to ongoing updates. Furthermore, tariffs agreed upon in dollars are practically adjusted according to U.S. inflation, reinforcing the analyst's warning that "a fixed tariff for a long time cannot be set, under any value," for Atome or any other electro-intensive industry.