The devaluation nominally doubled the amount of subsidies and The increase in energy tariffs today has no foreseeable ceiling. In a context of great uncertainty, the sale of Edesur has been suspended and the Government is analyzing how to adjust gas and electricity prices accordingly. a ceiling that makes these increases socially and economically sustainable.
Total energy subsidies in 2023 amounted to the equivalent of $9.5 billion. Cutting it is essential to eradicate the public finance deficit, an essential objective for Javier Milei’s administration. But the rise of the official dollar (118%) with which his administration began nominally doubled the value of such subsidies, since the prices of energy products aredollarized. Here is a first paradox: rising dollar, rising energy costs, and rising subsidies in pesos.
A middle-income (N3) residential electricity user in the metropolitan area pays the equivalent of 17 dollars per megawatt, which actually costs 58 dollars to produce. To eliminate subsidies, the consumer would have to pay the full cost of inputs, which account for the majority of his bills.
However, the wholesale dollar cost is only the first step in the race. There are also transporters and distributors, who are eagerly awaiting public hearings to improve their revenues.
In a controlled scenario and with conservative assumptions, reduce subsidies to the electricity sector by only half This was estimated by the consultancy firm Economía y Energía Average rate increases for high-, middle- and low-income users of 151%, 377% and 182%, respectively, are expected.
With wholesale gas at $4, increases in February would be approximately 260%, 402%, and 253% for N1, N3, and N2, respectively. And there will still be a million dollar tax burden for subsidies.
The national state has already held public hearings to validate a stratified gas increase: Consumers will pay all or at least a larger share of the value of gas production and will also face a higher remuneration for other connections.
Gas distributors have already requested in writing an increase of this magnitude between 300 and 700% of the Distributive Added Value, which is equivalent to just over 20% of the final invoice.
The common argument is that they want to return to the prices set in the RTI drawn up by Mauricio Macri’s management and then adapt them to the wholesale price index from 2017 to today. Carriers have a similar ambitiondespite both having significantly changed their margins during the previous government.
The problem is that the increases allowed by former ministers Martín Guzmán and Sergio Massa were not enough to offset the rise of the dollar and inflation, an argument that supports the request for significant increases.
Between January 2020 and February 2024, the VAD of AMBA electrical distributors will have adjusted by 435%, against an inflation of 1.551% and a jump in the exchange rate of 1.287%. Just an example of what happens in regulated fare segments.
According to Edesur sources, this company will require an immediate 200% adjustment to your margin, to compensate for the deterioration of their income as soon as the round of negotiations with the libertarians opens. Bet it regulators are less hostile than outgoing ones, which undermined the potential value of the company. The National Electricity Authority chaired by Walter Matarello expressed negative opinions and applied various sanctions
The southern metropolitan area retailer is betting that the change in government will give it respite and it will be able to feel less harassed by the observations and sanctions that the regulator has applied recently, undermining the potential value of the company.
Faced with uncertain prospects, the company that manages the Italian Enel has made a decision suspend at least until March the sales process entrusted to Banco Santander, in the hope that the panorama will become clearer.
On December 18 Milei ordered by decree a new energy emergency until the end of this yearfrom that day the deadline expired to put an end to the (RTI) hoped for by Alberto Fernández but which did not materialize, which kept these privatizations in a gray legal area.
These in-depth reviews, which by law must be carried out periodically, allow the distribution of the dealers’ activity and the application of a tariff that covers operating costs, some investments and pursues a reasonable profitability, an always controversial concept. The new deadline for carrying out this joint task between the State and gas and electricity concessionaires is 31 December this year. In the meantime, There will be “transitional” increases, based on that final value.
Utopias with a diabolical economy.
That’s the ultimate goal consumers pay what they cost without state help and that energy prices do not become obsolete. The Energy Secretariat, chaired by Eduardo Chirillo, is in need set a break-even ratefirstly, which would then be adjusted monthly for inflation.
The problem is that the two key variables for this reorganization are restless: the exchange rate and the price increase, which is calculated in double digits monthly for the next few months. This could catapult the price of these public services to a level that is impossible to afford with real wages and impoverished pensions.
Andrés Chambouleirón, head of Enre (National Electricity Regulatory Body) in the Macrista administration, is categorical in judging the official strategy. “They should have eliminated subsidies before devaluing. A depreciation of this magnitude was not necessary and, due to the effect of inflation, it will not be sufficient. But they succumbed to pressure from cereal companies.” For the specialist, It is very likely that the exchange rate will rise againmaking energy costs and nominal subsidies more expensive.
The same official deputy and head of the Budget and Finance Commission, José Luis Espert, warned in radio statements that things “can go wrong and in three or four months we may have to devalue”. Anyway, Energy has already ruled out immediate elimination of subsidies for middle-income sectorsarchiving them and reserving them for a group of users still waiting for identification.
Officials in the area are working the concept of “energy poverty” to define who will continue to receive state aid. To avoid energy poverty, a family cannot allocate more than 10% of its total income to covering electricity and gas, according to a definition by Enargas published in 2021.
This would impose a relatively low ceiling on new electricity and gas values, which would not be able to express the expected adjustments along the entire chain. Like the previous government, Milei’s government will follow the path of linking income with the right to receive a subsidy. A dilemma awaiting resolution that puts into perspective any calculations on how much more expensive these services will be in the coming months.
Source: Clarin
