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UPDATE 1-Brazilian power firm shares slide on electricity price policy fears

(Adds shares reaction)

SAO PAULO, Feb 22 (Reuters) - Shares in the largest Brazilian power companies lost ground on Monday amid a larger market rout, after President Jair Bolsonaro promised to take steps to drive down electricity prices.

Brazil’s IEE index of power firms was down 4.3% in mid-morning trade, while the broader market index was 4.9% lower.

Preferred shares in state-controlled power holding Centrais Eletricas Brasileiras, known as Eletrobras, lost 6.1%, while shares in private firms CPFL Energia SA and Energisa fell 6.5% and 5.5% respectively.

Brazilian newspaper Folha de S. Paulo reported on Monday that Bolsonaro was considering using public funds and tax cuts to reduce consumer utility bills, after he promised over the weekend to intervene in the sector rein in prices.

Bolsonaro’s comments follow his move to replace the chief executive of Petroleo Brasileiro SA, known as Petrobras, after state-run oil company raised diesel prices by 15% in recent weeks.

Bolsonaro, a right-wing populist politician, said on Saturday he would reverse the trend of rising energy prices that he described as an attack on his presidency.

“Just as I said they wanted to bring me down in the pandemic by closing the entire economy, now they’ve decided to attack me via energy,” he told supporters. “We’re going to stick our finger into the electric sector, which is another problem.”

Power regulator Aneel estimates tariffs will rise 13% this year.

Aneel, the Energy Ministry and the presidential palace did not immediately reply to requests for comment.

The former chief executive of Eletrobras resigned last month citing hurdles to a proposed privatization of the company. (Reporting by Luciano Costa and Tatiana Bautzer; Editing by Andrew Cawthorne)

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