The Government has announced a decisive removal of subsidies: in May electricity bills rise by 75% and the year-on-year increase reaches 400%

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The Government has advanced with measures that will have a very important impact on gas and electricity bills, in magnitudes never applied so far in the administration. As argued by the International Monetary Fund, the Secretary of Energy completed the removal of subsidies in the cost of electricity. Therefore, subsidies are completely eliminated for the so-called high-income sectors e partially for medium sectors.

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Due to this measure, more than 4.5 million households will have to pay up to 125% more for electricity costs than in February. This will have a different impact depending on the region. In the city of Buenos Aires and suburbs the increase will be around 75% for so-called “high-income” homes.. This category includes family groups who earned more than $390,000 as of September 2022, want to continue accessing the “savings dollar” or they have not been entered in the grant register.

High-income families

There will be a tariff increase for Edenor and Edesur in June. Between that increase and the removal of subsidies, Tickets in Buenos Aires and the suburbs will increase nearly 400% year on yearin the case of high-income housing. In the official nomenclature they are called N1one of the segmentation categories.

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The Secretary of Energy, Flavia Royón, had anticipated that there would be a removal of subsidies for electricity consumption during this month. Tuesday was regulated. The increases surprised specialists. High-income households (N1) will have to pay 125% more for the electricity they consume. The impact on the ticket -in Buenos Aires- is around 75%.

In the case of middle class households (called N3, earned less than $390,000 as of Sept 2022, have no access to savings dollar), they continue to have a basic consumption block which maintains a high level of subsidies. But if they pass that block, the increase that will be applied to them will be 700%, with an incidence on the forms of 400%.

In any case, according to the specialists, the subsidized block is “generous” and middle-income houses would only be upgraded if they consume well above normal.

Pressure from the IMF

Pursued by the International Monetary Fund (IMF) To reduce energy subsidies, the government took two significant steps between Friday and Tuesday. Between Friday and Saturday, he reported that gas bills are rising 30% across the country. And they already rack up a 170% increase over last year.

But the most significant reduction in subsidies will come for electricity. High-income homes will pay 400% more for electricity from June than in 2022, at least in Buenos Aires and suburbs.

To withdraw the subsidies, the government does not require a prior public hearing. The public corresponds when a rate increase is decided to benefit the service providers.

Gas tariffs are decided at the national level. But those of light correspond to each province, except for AMBA (Buenos Aires and periphery), where the national executive power is in charge.

Electricity distributors in the provinces keep a higher percentage of what they charge in the bill than their counterparts in Buenos Aires (Edenor and Edesur). The latter capture only 20% of what they charge their customers on bills.

The cost of electricity represents 60% of the bills in the Edenor and Edesur concessionsaccording to companies. Those companies charge that amount, but they should turn around and pagan Cammesa, the wholesale administrator of the electrical system. They are left with leeway for providing the service.

By removing the subsidies for electricity costs, the government increases the portion of the bill that will be paid indirectly. It is no longer a tax, but less a subsidy. By removing these discounts, the final ticket amount will be 400% higher than it was in mid-2022, at least in high-income families in Buenos Aires and suburbs.

Whenever the previous Minister of Economy – Martín Guzmán – wanted to withdraw subsidies met with the resistance of Kirchnerism, with Vice President Cristina Fernández de Kirchner instructing her bishops to avoid it. With the change of minister, Sergio Massa seems to have more free hands advance in cutting subsidies, even on a much larger scale than Guzmán envisaged.

The gas increase will be between 20% and 37%, as reported by the regulatory body (Enargas). For high-income households named N1, the increase in gas bills accumulated since last winter is 170%, in the case of the Buenos Aires distributors (Naturgy and Metrogas). That way, it would be higher than year-over-year inflation for the period.

the houses of low (N2) and middle (N3) income. they have not lost gas subsidies at the same level as N1, but increases in their gas bills since last winter it will also be higher than 120%.

In electricity, it has been estimated that the elimination of subsidies and the increase in tariffs would lead to a 300% increase year on year, but specialized engineers are revising this projection, bringing it to 400% year on year.

The “regulated prices” (such as public services) had very low interference in the consumer price index in the period 2019-2022. They have just started to impact inflation since September/October 2022. In any case, the increases are not uniform, as they depend on household incomes and how they were in the segmentation.

Source: Clarin

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