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This case examines the dilemma confronting the Brazilian electricity regulator in the period following power rationing. Brazil privatized about 65% of the distribution companies (DISCO''s) in the 1990s, but the companies were hit hard financially, first by a dramatic change in the currency exchange, and then by a supply crisis that forced the government to require consumers to reduce their consumption by 20%. The case explores the deliberations by the Brazilian regulatory agency, ANEEL, on whether to grant significant tariff increases to DISCO''s during a period of economic turmoil. It also addresses several key regulatory issues: How to calculate the value of a regulated firm''s asset base, and, Should a regulated firm be compensated for changes in exchange rates. Similar problems are confronted by regulators in other sectors and other countries so that the lessons in this case are transferable. The case can be used either as part of a regulatory or project finance curriculum. It focuses on the financial and political factors that an economic regulator must weigh in the development of credible and sustainable tariffs.