Brazil’s Tariff Flag System was created to signal—month by month—when electricity generation is cheaper or more expensive. Instead of passing these cost swings only through the annual tariff adjustment, the mechanism reflects them in a more immediate and transparent way.
In practice, it mainly applies to consumers served by distribution utilities in the regulated environment (the captive market).
Who regulates and sets the Tariff Flags
To clearly understand the role of each institution, keep this map in mind:
- ANEEL (Brazilian Electricity Regulatory Agency): defines the monthly flag (Green, Yellow, Red Level 1 or 2) and sets the rules and additional charges.
- CCEE (Electric Energy Trading Chamber): by regulatory determination, manages the system’s financial resources and publishes bulletins and data that support the calculations behind the flags.
- ONS (National System Operator): provides operational system information (such as supply conditions and hydrological outlook), used as inputs to assess generation costs—for example, the need to dispatch thermal power plants.
The colors—and what they mean for your bill
The logic is simple: Green indicates favorable conditions; Yellow calls for attention; Red signals higher generation costs.
| Flag | What it indicates | Additional charge on energy |
| Green | Favorable conditions | No extra charge |
| Yellow | Costs rising | + amount per kWh |
| Red (Level 1) | High cost | + amount per kWh |
| Red (Level 2) | Very high cost | + amount per kWh |
The official additional charges per kWh are defined and updated by ANEEL and may be revised over time.
Why does the flag change?
When rainfall is lower and reservoir levels drop, the system tends to dispatch more thermal power plants, which usually have higher generation costs. This scenario shows up in sector indicators and assumptions used to support the monthly decision.
In short: a more expensive flag = electricity is more expensive to produce at that moment.
The business impact: more than “paying a little extra”
For companies with meaningful consumption, the flag is not a minor detail—it becomes a cost line that affects margins, pricing decisions, and cash-flow planning. And the biggest issue is often unpredictability: one month tightens the budget, the next eases it, and financial planning turns into a constant cycle of adjustments.
Energy-intensive sectors (such as industry, shopping centers, and supermarkets) tend to feel it more, because electricity represents a larger share of OPEX.
Free Energy Market (ACL): predictability as a competitive advantage
In Brazil’s Free Contracting Environment (ACL), your company negotiates its energy: price, term, volume, and contract structure. In practice, that means greater predictability and less dependence on monthly fluctuations that impact the captive market.
How to reduce the impact without complicating operations
A few simple actions can help—and they can be combined:
- Map where consumption happens (equipment, shifts, processes) before investing.
- Cut waste first: operational adjustments and maintenance often deliver quick payback.
- Reduce peaks and reorganize schedules when the operation allows it (demand management).
- Review contracts and your purchasing strategy, prioritizing stability (not “guessing” next month).
- Assess the Free Energy Market when your profile and eligibility make sense for the business.
How Deal Comercializadora can help
If your company wants to move beyond reacting month to month and build real predictability into its electricity costs, Deal Comercializadora can support you with an analysis of your consumption profile and the best contracting and management alternatives.
Contact Deal Comercializadora: contato@dealcomercializadora.com.br
