03 April 2009
Promoting Citizenship Through Energy Efficiency
By Fábio Palmigiani
In the developed world, electric power utilities educate customers about energy waste to boost energy efficiency. In the developing world, utilities educate customers about why it is in their own best interest to stop taking power for free and to become legitimate bill-paying customers.
Fábio Palmigiani is a freelance writer in Rio de Janeiro who specializes in business and energy issues.
Brazil, the world’s fifth largest country geographically, occupies nearly half of South America. With a population of 191 million, Brazil boasts one of the world’s 10 largest economies, and is considered one of the most promising global emerging markets. Brazilian industries churn out products to export worldwide, and the country’s electric power consumption is high.
Amidst the prosperity of a growing economy, social and class inequalities still abound. The Brazilian think tank IPEA reports that 90 percent of the world’s countries have a more balanced revenue distribution than Brazil, where 75 percent of the country’s wealth is in the hands of just 10 percent of the population. However, per capita income among the most underprivileged is growing between 7 and 8 percent a year, an unprecedented rate. Still, the federal statistics institute Instituto Brasileiro de Geografia e Pesquisa (IBGE) says that by 2020, the number of residents living in slums could climb to 55 million, equivalent to 25 percent of the national population.
Access to basic services like electricity in Brazil’s low-income communities is limited, and slum residents in the country’s southeast and northeast regions often resort to illegal power connections to meet basic needs such as refrigeration and lighting.
The government’s federal energy planning company Empresa de Pesquisa Energética (EPE) estimates that “commercial losses” — the formal term for illegal taps on electric transmission lines — average between 5 and 6 percent. However, power theft consumes as much as 25 percent of all energy produced in some regions in the northeast.
Brazilian power holding company Neoenergia owns power distributors in regions highly affected by power theft and informality.
“People don’t think power theft is a crime,” said Marcelo Maia de Azevedo Corrêa, the chief executive officer of Neoenergia. “Despite the support of the local government, we will only be able to eradicate this habit if the population realizes stealing power is not a smart thing to do.”
Safety is a big reason that power theft isn’t too smart. Haphazard connections to transmission lines and substandard equipment frequently lead to short circuits and fires.
“We had many episodes of fires in the past due to short circuits, with neighbors losing all their possessions. In some cases, people got hurt because of those problems,” said Gilson Rodrigues, president of a dwellers association in Paraisópolis, the second biggest slum in São Paulo. Locally known as a favela, Paraisópolis has a population of about 80,000 in a metropolitan area of about 19 million.
From Consumers to Clients
The combined concerns about power theft and safety inspired the launch of an ambitious project by São Paulo state power distributor AES Eletropaulo and the International Copper Association (ICA), in cooperation with the U.S. Agency for International Development (USAID). In 2005, the partners started a program to legalize electrical connections and reduce power theft, combined with the larger social goals of turning energy consumers into clients, promoting social inclusion and good citizenship.
“This program meant a lot for us in Paraisópolis, since power supply in our community has improved somewhat and many lives changed for the better,” said Rodrigues, president of the Paraisópolis Dwellers Association.
AES Eletropaulo managed to convince customers to accept client billing by offering subsidized rates to low-income consumers. The utility company also gave customers new, energy-efficient refrigerators, solar heaters, and light bulbs.
AES Eletropaulo launched the program in response to the significant social and economic changes sweeping across Brazil.
“In Brazil, population migration is a big issue. People leave from rural neighborhoods to metropolitan areas such as São Paulo and Rio de Janeiro,” said José Cavaretti, director of new projects for AES Eletropaulo. “These people cannot afford to pay the rent, so they invade public and private areas and start a new favela. And once a new favela grows exponentially, it becomes a neighborhood with big social and economic problems. With precarious living conditions, the residents cannot help but steal power from the grid.”
André Urani, an economist for the Brazilian think tank IETS, believes that a vicious circle of informality in Brazil began to take its toll on the country. “We got to a point where informality and transgression came to an extreme. Those paying their power bills end up paying for consumers with overdue bills.”
If allowed to continue, Urani predicts that the cycle could become detrimental to future development and infrastructure improvement in Brazil. “In this sense, it is highly questionable if a company wishing to open a new plant would choose a location with a high power bill due to informal practices [in the region]. This vicious circle must be broken somehow,” Urani explained.
Investing in Quality of Life
To turn power users into clients and to convince a low-income population that paying power bills is important, AES Eletropaulo and several Brazilian power distributors invested in improving quality of life in underprivileged communities. Power distributors Ampla in Rio de Janeiro State, Coelba in Bahia State, Celpe in Pernambuco State, and Cosern in Rio Grande do Norte State replaced a combined 30,000 old refrigerators for new, power-efficient models in favelas. In most cases, the old appliances were recycled and the money was donated to charity or reinvested in the community involved.
Other families were offered steep discounts and long-range payment plans for new energy-efficient refrigerators, typically one of the greatest electricity guzzlers in the home. Coelba in Bahia sells the appliance with a 60 percent discount, payable in 24 installments. To reduce electricity costs for home lighting, the power holding company Neoenergia, which owns Coelba, Cosern, and Celpe, donated 365,000 power-saving light bulbs.
“The main goal is to adjust energy demand in low-income communities to their domestic budget,” said Marcelo Maia de Azevedo Corrêa. “The new refrigerators bring an additional benefit because we are talking about an appliance better-equipped to preserve food and improve health. The program encourages energy consumption in a sustainable way,” the Neoenergia CEO said.
More than 400 communities in Bahia, Pernambuco, and Rio Grande do Norte states have already taken advantage of Neoenergia’s program, which also includes upgrades in electric wiring to prevent short circuits and reduce consumption.
Asked whether low-income clients might fall delinquent in their bills again, AES Eletropaulo’s Cavaretti said that permanent campaigns encourage people to keep paying their bills.
“There is no point in investing in power distribution networks if the clients start defaulting again. We are holding educational campaigns to make people aware of the importance of a steady and safe power supply,” the executive said. Educational agents counsel families who are approaching delinquency in their bills.
Since 2005, AES Eletropaulo has “regularized” 275,000 residential, industrial, and commercial clients in 1,240 favelas in the metropolitan region of São Paulo, providing reliable, safe energy supplies to 1.1 million people, according to Cavaretti.
Social Inclusion
The Brazilian power distributors think these programs have influence beyond improving electricity transmission, increasing efficiency, and legitimizing power customers. They enhance their own corporate social responsibility activities with a further goal of fostering citizenship and social inclusion among their clientele.
Becoming a bill-paying customer in good standing can be a passport to a new world because the utility bill provides proof of a fixed address, and can lead to issuance of a residence certificate. In Brazil, that certificate is necessary for a person to find a job, buy products on an installment plan, or secure a loan.
“This is social inclusion, by all means,” Cavaretti said.
Neoenergia’s Corrêa agrees. “It’s not just providing refrigerators. When you come up with a social program like this, you are able to register individuals, give them a little humanity, and make them part of the society,” he added.
Dwellers association president Rodrigues attests that social and educational programs on responsible energy use are popular in Paraisópolis. “It is good to have regular power supply at subsidized rates. But I guess the progress went beyond that. Once Paraisópolis residents became formal clients … they [made] a huge step away from the informal economy. And I should add that payments overdue in Paraisópolis were greatly reduced,” according to Rodrigues.
AES Eletropaulo plans to replace 20,000 refrigerators in São Paulo State before the end of 2009 and is encouraging cities in developing countries in Africa and Asia to adopt similar programs. The company, ICA, and USAID will present the Paraisópolis case in Paris during the Energy Efficiency Global Forum and Exposition April 27-29, 2009.
The Brazilian government may also extend power-theft prevention and energy-efficiency programs, and is currently studying the sale of subsidized refrigerators throughout the country, drawing on the power distributors’ expertise in the favelas.
The opinions expressed in this article do not necessarily reflect the views or policies of the U.S. government.
