Paradoxically, Edesur’s administrative intervention took place at a time when distributors in the metropolitan area hold the best service quality record in recent years, according to official measurements. The other apparently dissonant data is that, with the sequence of tariff increases arranged from April, the cash of the dealers under the magnifying glass will strengthen by more than 260% in this quarter.
After prolonged blackouts in the midst of the last intense and unusual heat wave, the National Electricity Regulatory Authority decided to intervene in the southern distributor for 180 days, entrusting this responsibility to Jorge Ferraresi, former mayor of Avellaneda.
It’s more about a symbolic gesture by the government to appease the fury of consumers left without service on the hottest days of a decision with concrete operational repercussions in the provision, already monitored by the representatives of the regulatory body.
However, the apparent attack on the company led by the Italian Enel, in the process of selling, it can hardly end with a revocation of the concessionpossible maximum penalty for the contractor who fails to fulfill his obligations, despite the shortcomings of the service.
The glassy legal situation in which electricity privatizations find themselves, with contracts under permanent review and provisional tariff agreements, makes any definitive ruling difficult.
But according to the monitoring of Enre itself, Edenor and Edesur in recent years progressively improved the conditions of service deliverybeyond the sustained cuts many users experienced during the last heat spike, expressed in stats still being processed.
One of the evaluation mechanisms available to the regulatory body is that of the frequency and duration of supply cuts, which are averaged every six months.
According to the latest information available, referring to the period April-September 2022, average outages per user were 7 hours on a six-month average for the Southern distributionan hour above Edenor (if you don’t take the “force majeure cuts” palliative).
These values are well below what was recorded in the previous moments and without reaching the maximum foreseen in the original contracts, of 10 hours of cutting in that period.
The SAIDI (according to the initials that identify this parameter), averaged 15 hours towards the end of Mauricio Macri’s mandate and the beginning of Alberto Fernández. But it had comfortably exceeded 30% during Cristina Kirchner’s career (2013-2014).
When these values are not satisfied, fines apply. Only if these economic sanctions exceed 20% of the billing for a period, then could the door be opened for eventual nationalisation.
There are other performance indicators that allow for the same but related to specific events and, perhaps, of more discretionary application. Among them, some serious non-compliances such as leaving users without benefits for an extended period.
They are concessions for 99 years, which do not involve the assets: these belong to the National State, which in theory could recover them at the end of the license. Or earlier, in a situation conducive to the early termination of the award.
Walter Martello, controller of Enre, suggested in public statements days ago that this could be one way to do it recover full state sovereignty over this private service, without provoking a damages suit for the partner. If there is “fault” of the private shareholder, there would be no right to compensation through ICSID (World Bank Tribunal) or any other international arbitration.
However, this task does not seem easy and there is no government spirit to throw out those who are trying to make a sale, which could result in the appearance of local buyers, with a more fluid dialogue with the government.
The legal situation of these concessions has been precarious ever since the original contracts were regularly patched up. The tariffs have been weighted and independent of the costs, and the public fund has intervened in the activity through subsidies that help to cover them.
Today it is underway “transitional rate review” and any increase is available due to a “final”. Originally, the tariffs could be reviewed every 5 years or, exceptionally, on very special occasions and in a process which did not exceed six months.
In this precarious and widespread framework, the Enre authorized two electricity price adjustments in the metropolitan area (Capitale and Conurbano), which will significantly improve distributors’ revenues.
The added value of distribution Will rise 108% in April and 74% in June, cumulatively implying a cash restructuring of 261% of companies.
Since distribution is only part of the bill paid by end users, the impact of this adjustment is minor and differentiated according to the level of each consumerassigned by the ongoing segmentation.
The universe of residential consumers in the metropolitan area defined as average income (between $177,000 and $619,000) will see an overall increase of 68% in the quarter; the high-income, 43% and the low-income, 114%.
This is explained why the cost of electricity itself is lower in the lowest income bracket because they benefit from higher subsidies. Hence, the distribution has a higher relative weight in these tabs.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.