Default on the Brazilian electric energy market has spread to critical levels, energy traders said on Tuesday, as hydroelectric generators balk at hefty bills for which the local regulator says they are on the hook.
After nearly two years of drought and long delays in completion of new generation projects such as large scale dams in the Amazon, Brazil’s hydro generators have been unable to produce enough electricity to cover their supply contracts.
And the energy market regulator Aneel said they must buy energy on the spot market to cover their commitments.
Conditions on Brazil’s energy markets continue to deteriorate due to a growing number of hydroelectric companies that have secured court injunctions exempting them from paying these additional costs for costly spot energy, local energy traders said.
Brazil’s thermoelectric plants, which run on natural gas, fuel oil and diesel, have been picking up the slack in generation while the hydro plants remain partially off line but could soon run into cash flow problems if they do not receive payments due from the CCEE.
Brazil’s state-run oil company Petroleo Brasileiro SA , is one of the largest operators of thermoelectric plants here, and is already struggling with cash flow problems.
Petrobras is also the main distributor of fuels for thermoelectric plants in the country.
Brazil Energy Insight 
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