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27. REVENUE

12 Months Ended

Dec. 31, 2020

27.

REVENUE

Revenues are measured at the fair value of the consideration received or to be received and are recognized on a monthly basis as and when: (i) Rights and obligations of the contract with the customer are identified; (ii) the performance obligation of the contract is identified; (iii) the price for each transaction has been determined; (iv) the transaction price has been allocated to the performance obligations defined in the contract; and (v) the performance obligations have been complied.

	2020			2019 (Restated)			2018 (Restated)
Revenue from supply of energy (a)		26,432			26,928			24,872
Revenue from use of the electricity distribution systems (TUSD) (b)		3,022			2,722			2,045
CVA, and Other financial components (c)		455			58			1,973
Reimbursement of PIS/Pasep and Cofins over ICMS credits to customers– realization (1)		266			—			—
Transmission revenue
Transmission operation and maintenance revenue (d)		280			352			343
Transmission construction revenue (d) (note 14)		201			312			138
Interest revenue arising from the financing component in the transmission contract asset (d) (note 14)		438			328			311
Generation assets - indemnity revenue		—			—			55
Distribution construction revenue (e)		1,436			980			802
Adjustment to expectation of cash flow from indemnifiable financial assets of distribution concession (g)		16			18			—
Revenue on financial updating of the Concession Grant Fee (h)		347			318			321
Energy transactions on the CCEE (i)		154			432			217
Mechanism for the sale of surplus (h)		234			—			—
Supply of gas		2,011			2,298			1,995
Fine for violation of service continuity indicator		(51	)		(58	)		(44	)
Recovery of PIS/Pasep and Cofins (note 9)		—			1,428			—
Other operating revenues (j)		1,709			1,721			1,585
Deductions on revenue (k)		(11,722	)		(12,351	)		(12,314	)
Net revenue		25,228			25,486			22,299

(1)	For more information, see note 9 from this financial statements.

a)	Revenue from energy supply

These items are recognized upon delivery of supply, based on the tariff specified in the contractual terms and approved by the grantor for each class of customer or in effect in the market. Unbilled supply of energy, from the period between the last billing and the end of each month, is estimated based on the supply contracted. For the distribution concession contract, the unbilled supply is estimated based on the volume of energy delivered but not yet billed.

This table shows energy supply by type of customer:

	GWh (1)						R$
	2020		2019		2018		2020		2019			2018
Residential		10,981		10,538		10,267		9,875		9,668			8,658
Industrial		12,731		14,873		17,689		4,171		4,760			4,893
Commercial, services and others		8,571		9,335		8,380		4,979		5,439			4,683
Rural		3,766		3,795		3,615		2,190		2,058			1,794
Public authorities		714		905		871		522		654			575
Public lighting		1,243		1,357		1,384		550		614			585
Public services		1,362		1,373		1,316		722		725			646
Subtotal		39,368		42,176		43,522		23,009		23,918			21,834
Own consumption		34		38		41		—		—			—
Unbilled revenue		—		—		—		9		134			48
		39,402		42,214		43,563		23,018		24,052			21,882
Wholesale supply to other concession holders (2)		13,907		11,920		11,992		3,363		2,943			3,002
Wholesale supply unbilled, net		—		—		—		51		(67	)		(12	)
Total		53,309		54,134		55,555		26,432		26,928			24,872

(1)

Data not audited by external auditors.

(2)

Includes a CCEAR (Regulated Market Sales Contract), ‘bilateral contracts’ with other agents, and the revenues from management of generation assets (GAG) for the 18 hydroelectric plants of Lot D of Auction no 12/2015.

b)	Revenue from Use of the Distribution System (the TUSD charge)

These are recognized upon the distribution infrastructure becoming available to customers, and the fair value of the consideration is calculated according to the TUSD tariff of those customers, set by the grantor. The total amount of energy transported, in MWh, is as follows:

	GWh (1)
	2020		2019
Industrial		18,612		17,723
Commercial		1,300		1,320
Rural		32		17
Concessionaires		315		341
Total		20,259		19,401

(1)

Data not reviewed by external auditors

c)	The CVA account, and Other financial components

The results from variations in the CVA account (Parcel A Costs Variation Compensation Account), and in Other financial components in calculation of tariffs, refer to the positive and negative differences between the estimated non-manageable costs of the subsidiary Cemig D and the cost actually incurred. The amounts recognized arise from balances recorded in the current year, homologated or to be homologated in tariff adjustment processes. For more information please see Note 14.

d)	Transmission concession revenue

•

Construction revenue corresponds to the performance obligation to build the transmission infrastructure, recognized based on the satisfaction of performance obligation over time. They are measured based on the cost incurred, including PIS/Pasep and Cofins taxes over the total revenues and the profit margin of the project. For more information, see note 15.

•

Operation and maintenance revenue correspondes to the performance obligation of operation and maintenance specified in the transmission concession contract, after termination of the construction phase. They are recognized when the services are rendered and he invoices for the RAPs are issued.

•

Interest revenue in the contract asset recognized, recorded as transmission concession gross revenue in statement income. Revenue corresponds to the significant financing component in the contract asset, and is recognized by the linear effective interest rate method based on the rate determined at the start of the investments, which is not subsequently changed. The average of the implicit rates is 6.86%. The rates are determined for each authorization and are applied on the amount to be received (future cash flow) over the contract duration. This includes financial updating by the inflation index specified for each transmission contract.

The margin defined for each performance obligation from the transmission concession contract is as follows:

	2020			2019			2018
Construction and upgrades revenue		201			312			138
Construction and upgrades costs		(147	)		(220	)		(96	)
Margin		54			92			42
Mark-up (%)		36.73	%		41.82	%		43.75	%
Operation and maintenance revenue		279			352			343
Operation and maintenance cost		(223	)		(388	)		(215	)
Margin		56			(36	)		128
Mark-up (%)		25,11	%		(9.28	%)		59.53	%

(1)

The negative margin observed in 2019 related to the performance obligation to operate and maintain is due the recognition of the non-recurring tax provision, in the amount of R$135.

e)	Distribution construction revenue

Construction revenue corresponds to the performance obligation to build the distribution infrastructure during the construction phase. Considering that constructions and improvements are substantially executed through outsourced parties; and that all construction revenues is related to the construction of the infrastructure of the energy distribution and transmission services, Company’s management concluded that construction contract revenue has zero profit margin.

f)	Adjustment to expected cash flow from financial assets on residual value of infrastructure asses of distribution concessions

Income from fair value change of the Regulatory Remuneration Asset Base.

g)	Revenue on financial updating of the Concession Grant Fee

Represents the inflation adjustment using the IPCA inlfation index, plus interest, on the Concession Grant Fee for the concession awarded as Lot D of Auction 12/2015. See Note 14.

h)	Energy transactions on the CCEE (Power Trading Chamber)

The revenue from transactions made through the Power Trading Chamber (Câmara de Comercialização de Energia Elétrica, or CCEE) is the monthly positive net balance of settlements of transactions for purchase and sale of energy in the Spot Market, through the CCEE, for which the consideration corresponds to the product of energy sold at the Spot Price.

i)	Mechanism for the sale of energy surplus

The revenue from the surplus sale mechanism (‘Mecanismo de Venda de Excedentes – MVE’) refers to the sale of power surpluses by distributor agents. This mechanism is an instrument regulated by Aneel enabling distributors to sell over contracted supply – the energy amount that exceeds the quantity required to supply captive customers.

j)	Other operating revenues

	2020		2019		2018
Charged service		11		17		14
Services rendered		139		183		188
Subsidies (1)		1,395		1,266		1,136
Rental and leasing		164		189		90
Reimbursement for decontracted supply (2)		—		65		145
Other		—		1		12
		1,709		1,721		1,585

(1)

Includes the revenue recognized for the tariff subsidies applied to users of the distribution system, in accordance with the Decree n.7,891/2013, in the amount of R$1,035 in 2020 (R$1,079 in 2019). Includes the subsidies for sources that are subject to incentive, rural, irrigators, public services and the generation sources that are subject to the incentive; and also includes the tariff flag revenue in the amount of R$47 in 2020, recognized because of the creditor position assumed by the Company in CCRBT.

(2)	Reimbursement for suspension of energy supply –Renova.

k)	Deductions on revenue

	2020		2019 (Restated)		2018 (Restated)
Taxes on revenue
ICMS		6,098		6,358		5,657
Cofins		2,214		2,408		2,549
PIS/Pasep		481		524		553
Others		5		7		8
		8,798		9,297		8,767
Charges to the customer
Global Reversion Reserve (RGR)		16		16		19
Energy Efficiency Program (PEE)		73		69		64
Energy Development Account (CDE)		2,443		2,448		2,603
Research and Development (R&D)		43		41		38
National Scientific and Technological Development Fund (FNDCT)		43		41		38
Energy System Expansion Research (EPE of MME)		21		20		19
Customer charges – Proinfa alternative sources program		39		52		40
Energy services inspection fee		35		30		26
Royalties for use of water resources		62		43		45
Customer charges – the ‘Flag Tariff’ system		149		294		655
		2,924		3,054		3,547
		11,722		12,351		12,314