Tariff segmentation: delay and low savings

Of

Cledis Candelaresi

In the event that the segmentation of electricity and gas tariffs is successful, the National Administration could have it annual savings of between $ 600 and $ 750 million, measured at the current official exchange rate. The amount, which is small in relation to the overall number of grants planned for this year, would be drastically reduced this year due to its complex and late implementation.

As foreseen by the creators of the new tariff scheme, with which the richest decile of the population will begin to pay the entire tariff, the State will be able to save between 80,000 and 100,000 million pesos a year in subsidies. That this objective will only be achievable if the new regime is applied for a full year.

In 2022 it could hardly exceed 15,000 million, an important but almost insignificant figure compared to other extraordinary figures of state aid to the sector.

The internal public differences that exist in government in the energy area are diluted in the definition phase the goal of fragmenting the universe of users of these public services into three: reduce state subsidies, which include the high costs of importing gas and liquid fuels, starting with the richest segment.

But the discrepancies deepen when it comes to deciding how to actually get the richest decile of the population to pay full fare.

The segmentation designed by the Ministry of Economy still faces the challenge of becoming reality through new rate charts which must be defined by the regulatory bodies and applied by the licensees of the service throughout the national territory. At the same time, Martín Guzmán has to overcome the criticisms of the Secretariat for Energy itself, where there is skepticism about the application of the formula.

So far the great difficulty of a gradual removal of subsidies for electricity and gas tariffs has been find an equal auction that does not generate injusticedepriving state aid to those who deserve it and supporting it to those who do not deserve it.

The application of a socio-economic criterion, which combines many variables, forces us to create a register from scratch. Here because all users of the service must fill in an affidavit form to report on their situation as consumers, whether they are retirees, residents of popular neighborhoods or luxury timeshare owners.

The state can corroborate the veracity of the data by cross-checking the available information. But, as they explain in Economics, it doesn’t even have a list with mixed guidelines nor is it possible to do so without the cooperation of the consumer.

The segmentation architecture implies the “creation of a domicile” to which a meter is associated first and then a user. So a person is connected to a certain meter, regardless of whether or not he is the owner of that property. From there they extract other data from their economic profile, such as net household income.

Families with a net income equal to or greater than 350,000 pesos per month (or boat, three cars, etc.) would pay the full value of these services consumed from June to the end of the year, thanks to a gradual reduction scale. Example: If your last consumption was $ 1,900, the next will be $ 3,000, the next $ 4,500, and your December bill will be $ 5,700.

Also the rest of the users, to be included in the other two categories it will face increases, albeit minor onescorresponding to 80% of the Salary Variation Coefficient or 40% of this index, in the case of beneficiaries of the social rate.

This latest increase arranged last month aims to transfer part of the cost of gas and electricity to users, which is now borne by the public fund. The remuneration for carriers and distributors already justified the first increase in these tariffs at the beginning of the year.

The consequence of these latest adjustments, segmenting the population, is the cut in energy subsidies this year it would require a fiscal effort of over $ 15 billion. Especially since Argentina has to import liquefied gas and other liquid fuels to cover the shortage of local production.

The first difficulty is that the Central must have all the foreign currency to carry out this operation, which at this moment forces it to perform expert maneuvers. The other problem is that, through the state-owned IEASA, the state therefore recovers only a minor part of the price it pays for those imported goods when it discharges them into the system (between 10 and 20% of the liquefied gas, for example).

At the end of last May, the total expenses of the National Administration had beaten inflation with a real increase of 13%. But in the same period, energy subsidies increased by 50% compared to the same period of the previous year and amounted to 538,000 million pesos.

This real leap has only been surpassed by some social programs, it represents 10% of total expenditure and consecrates energy subsidies as the second largest expenditure, after retirement and pensions.

In the recent DNU 331, of budget changes, the provisions for energy subsidies were strengthened by an additional 624.725 million, bringing the total amount foreseen for the year to 1,619,777 million pesos (approximately 12,500 million dollars). There is no guarantee that this figure will rise with another decree or administrative decision.

The problem is that the same decree provides an increase in the national financial deficit to be covered by more debts, without resorting to the users of the Central. Cyclopean challenge in this context.

That bill excludes the worst that winter will be, when there will be a peak in demand and purchase of energy products abroad with increasing values. The Russian invasion of Ukraine and the reshuffling of hydrocarbon suppliers raise the value of goods imported from Argentina, which It is not the only country to suffer from this phenomenon..

Restrictions on Russia’s oil and gas supply have not only caused a significant increase in electricity and all fuels, but have also created significant state economic support.

It is clear that the macroeconomic tables, the availability of public resources and the level of average income expressed in hard currency are very different from those of Argentina, but the solutions are conceptually similar.

Italy has ordered a tax cut on petrol for a certain category of less well-off consumers; Germany has proposed to the population to accumulate basic products in case of shortage: its industry, basically chemical and automotive, is severely damaged by the limitation of Russian gas; The French left is fighting for the imposition of maximum prices and everyone, without exception, has allocated tens of billions of euros in their budgets for the year to cover part of the cost of services which, despite this, have unprecedented increases for those latitudes.