Brazil orders rolling blackouts as demand spikes in record heat

SAO PAULO - Rolling blackouts swept across parts of Brazil on Monday as the grid operator ordered select power cuts to avoid a larger crisis, drawing attention to a fragile electric system that is buckling under the strains of record-breaking heat and dryness.

Grid operator ONS said it orchestrated 2,200 megawatts of controlled outages in eight states as the hottest day of the year in Sao Paulo, where the temperature hit 36.5 Celsius (97.7 Fahrenheit), and other southeastern cities led to surging demand from air conditioners and other power-hungry appliances.

Eletronuclear, a unit of state-run power company Eletrobras , said nuclear reactor Angra I powered down automatically at 2:49 p.m. local time (1649 GMT) due to a drop in frequency on the national grid. The company said there were no risks to workers or the environment due to the stoppage.

Brazilian officials have repeatedly denied the need for energy rationing, even as the driest spell in more than 80 years drains hydropower reserves and forces the use of more costly thermal plants.

The drought has also raised the specter of water rationing in Sao Paulo, Brazil's business hub and South America's largest metropolitan area.

Shares of electric companies tumbled on the Sao Paulo stock exchange, dragging an industry index nearly 5 per cent lower as news of the power cuts spread. CPFL Energia SA fell more than 7 per cent, while AES Eletropaulo, Light SA and Copel each lost around 6 per cent.

A privately run subway concession in Sao Paulo, ViaQuatro, said it suffered an electric failure at 2:35 p.m. After 90 minutes ViaQuatro said it had restored service to part of the subway line, but two downtown stations remained closed.

ONS said the national grid was back to normal by 3:45 p.m. after controlled outages affecting less than 5 per cent of the system's total demand.

Power companies have already been struggling under President Dilma Rousseff, who rattled investors by unexpectedly forcing down electric rates in an effort to fight inflation.

Rousseff's new economic team, which took office at the start of her second term this month, has said utilities will be able to raise power rates this year. A government source told Reuters on Friday that rates could rise as much as 60 per cent this year.

Separately on Monday, Finance Minister Joaquim Levy laid out a series of tax increases on fuel, imports and consumer loans, but he held off major announcements for the electric sector.