In January, users paid only 22% of the real cost of electricity: Caputo relied on subsidies to obtain a surplus

The proportion between what users of the national electricity system pay and the amount paid by users of the national electricity system subsidies State contribution was in January the most unfavorable for the treasury since 2015. With the price of energy being transferred to the treasury rates, As of January 2024, users were covering only 22% of the cost of electricity production and imports, a level not seen since the end of Cristina Kirchner’s second presidency.

In that period Mauricio Macri began a rapid journey of rate increases reduce public spending on subsidies and ensure that prices better reflect costs, also as a sign of savings and efficiency in the use of resources.

In this sense, after the December devaluation, the situation that Javier Milei must resolve is similar, in full inflationary acceleration, to that of eight years ago. Just this month the Ministry of Energy launched a massive cuts to benefits to high-income families, SMEs and industries, hospitals, schools, neighborhood clubs, buildings and public lighting, which will lead to increases in bills in some cases exceeding 400%.

According to the 2023 annual report of Wholesale Electricity Market Management Company (Cammesa)last year the average cost of operating the system – which includes the purchase of fuel, contracts and energy imports – was $73.2 per megawatt hour (MWh), while the average price paid for demand was 34.8 US dollars; that is, a 47.5%. By 2022, that ratio had been 40%.

Opening the data shows that the industries paid on average 91% of the cost; shops, 58%; and families, 32%, with large differences between those with high incomes (they covered 80% with their tariffs) and those with medium and low incomes (19% and 16% respectively).

All of this will culminate this February, with nearly all electricity system users paying more than $48,000 per megawatt-hour in wholesale cost, with the exception of Tier 2 and 3 (N2 and N3) homes of the segmentation, which in 2023 they consumed 42.6% of the total electrical energy of the system.

The Economist Nicola Gadano he noted on his social networking account Twitter That Argentina has the cheapest electricity prices in the regionaccording to data from the Uruguayan company SEG Engineering. Households across the country paid an average of $25 per MWh and industries around $38, a little less than Paraguay and much less than in Brazil, Chile and Uruguay.

However, the impact this situation has on tax matters is significant. In January, the government recorded a financial surplus of $518,408 million, widely celebrated by President Javier Milei and the Minister of Economy. Luis Caputo. However, the result was the result of, for example, energy subsidies were not paid.

Subsidy debt

Having not received money from the National Treasury to pay electricity producers, gas producers and the public company Energía Argentina (Enarsa), the joint company Cammesa has accumulated a “floating” debt of $497,199.9 million. That is, money that sooner or later will have to come out of state coffers, or could arrive soon maintenance problems of the electricity supply and investments in Vaca Muerta gas.

Giuliano Rossotechnical specialist of Argentine Institute of Energy (IAE), General Mosconi, specified: “Cammesa and other entities in the energy sector represent over 10% of the total expenditure of the National Public Administration (APN). So far this year no expenses have been accrued, but it is not unusual for this to happen in the first few months, it usually happens.”

The Government’s agreement with the International Monetary Fund (IMF) establishes that energy subsidies will fall this year from the equivalent of 1.6% of gross domestic product (GDP) to 1.1 points, an adjustment of between 2,500 and 3,000 million dollars, which will be achieved through tariff increases and lower gas imports.