After defining the increases on gas and transport tickets, the Government will launch this Friday the first public hearing to adjust electricity rates. There the electricity distributors Edenor and Edesur should ask for a recomposition.
Industry sources assure this The request that the electricity companies would make at the hearing would be less than 200%.
As happened with gas, the electricity regulator (ENRE) will expose the costs of the system and propose a reduction in production subsidies. Two weeks ago, the Secretary of Energy, Eduardo Rodríguez Chirillo, ratified in Congress that energy tariffs must reflect the “cost of supply” and that the subsidy should go to “those who cannot pay the full price”.
In turn, distribution companies will show a projection of their revenues under the current regime. In reports submitted to ENRE, Edenor estimates it needs $521,000 million to cover its deficit and Edesur $330,000 million, without taking into account the ongoing global tariff review. They also require a monthly and automatic adjustment, following the path of the gas distributors.
The hearing will determine a “temporary tariff adjustment” distribution in the AMBA, where these companies are regulated by the national state. The other components of the vote are generation, transportation and taxes. The government seeks to advance “price liberation” to reduce subsidies in the energy and transport sectors by 0.7% of GDP per year.
Although the segmentation of subsidies in Alberto Fernández’s administration resulted in electricity tariff adjustments of up to 500%, The devaluation of the peso has reduced the value paid by electricity demand and rising inflation has reduced the fee users pay. According to distributors, the sector covered 67% of the cost of energy (in dollars) in December.
Therefore, the difference between the so-called monomic cost ($18,602 MWh) and the price paid by distributors ($12,113 per MWh) was covered by subsidies to the wholesale electricity market administrator CAMMESA. The majority state company buys energy from generators and resells it to distributors. The balance not paid to the plants ends up being subsidized by the state.
In this context, the consultancy firm Economía y Energía, directed by Nicolás Arceo, increases estimated between 150 and 400% Assuming that higher income users (level 1) will have no subsidies on the cost of energy, middle income users (level 3) will pay the full cost of supply and low income users (level 2) will pay the cost of energy. 20% of the cost of supply.
According to these projections, which include distribution value recomposition (VAD), a high-income household with an average bill of $10,467 in November would pay $26,300 in March (151%); low income, $3,970 to $11,211 (182%); and the medium sector, from 5,518 to 26,300 dollars (377%), although due to the reduction of subsidies the jump could reach 633% in some categories.
“The increases would affect the middle-income sectors, particularly those with lower levels of consumption. Currently, the subsidized block has a greater weight in the consumption of users in this category and, therefore, the total elimination of the subsidy would lead to a significant increase in tariffs,” says Economía y Energía.
The last comprehensive tariff review was in April 2017. Then, in April 2019, Mauricio Macri’s leadership froze the planned increases and the Fernández government declared a state of emergency, suspending the comprehensive review and authorizing temporary increases . The latest dates back to June last year, when after the primaries Sergio Massa froze the adjustments.
Javier Milei’s management has taken a new turn by declaring with a DNU the state of electricity emergency under federal jurisdiction until the end of 2024 and ordering temporary adjustments until the comprehensive review is completed. In this context, ENRE, which intervened again on January 1, convened the hearing on Friday with the participation of 63 registered participants.
The authorities’ intention is to apply the new tariff in March and reduce subsidies to reach the primary surplus of 2% of GDP agreed with the IMF. This item will be the one that will suffer the biggest cut (along with public works), as it will have to be reduced from 2.1% in 2023 to 1.4% of GDP in 2024. an adjustment of more than $3 billion.
Source: Clarin
