New electricity prices in Argentina

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The new administration of President Mauricio Macri, who took office on December 10, 2015, has taken drastic steps to increase electricity prices by eliminating adjustments and subsidies implemented in 2003 in response to severe economic conditions. The new reference tariffs, established via government Resolutions 6 and 7/2016, establish price increases expected to average 300-500%, depending on consumption.

While these price increases have not yet been fully implemented, it is estimated that a residential consumer in the under 300 kwh category with a consumption of exactly 300 kwh will face a price increase of 484.3% (El Cronista, http://www.cronista.com/economiapolitica/Nuevas-tarifas-electricas-la-formula-para-calcular-las-proximas-facturas-y-cuatro-ejemplos-20160201-0048.html). Said customer will be paying 0.0421 USD/Mwh before taxes and fixed costs, and 0.06/Mwh with all charges included (at today’s exchange rate). While the increases are drastic and will have an impact on consumption and inflation, they are still below the regional average of 0.098 USD/Mwh (Source: Instituto Argentino de Energía, http://asap.org.ar/wp-content/uploads/2014/09/Subsidios_asap_iae.pdf).

These price increases will be attenuated for consumers who qualify for a “Social Tariff,” including people with incomes or pensions of up to 2 minimum wage salaries, recipients of unemployment insurance or welfare assistance, and the disabled, so long as consumption remains below 300 kwh/month and is the same as or less than the month’s consumption in 2015. Other exclusions apply, including ownership of a vehicle less than 15 years old.

The measures taken to increase electricity tariffs are being challenged by consumer protection groups on account of not following the procedures established by law, which include a public consultation stage before increases to wholesale prices can be passed on to consumers.

These measures were adopted in the midst of what the government is calling an “energy emergency” which also involves significant changes to regulation and pricing of other energy products, none of which seem to benefit consumers, even with historically low prices for oil.

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