Argentina is set to dramatically raise electricity tariffs, with increases of at least 200% to be implemented from 1st February.
The announcement – already anticipated by the government – was made official today in the Official Gazette. The reference price for energy distributors will rise from $320 to $1427.6 per megawatt month (an increase of 345%), while the reference market price will more than triple from $254.5 to $773.0 per megawatt hour.
According to the new pricing system, customers that use less than 300 kilowatts of power will benefit from a reduced tariff (around 50% lower than the full tariff). There will also be added discounts for those who reduce their consumption by at least 10% compared to the same period of the previous year.
For low-income households there will be a ‘tarifa social’ (social tariff) which entails the state covering the costs up to 150 kilowatts of usage per month. Consumption above this level will still be charged at a significantly lower rate for these households.
The higher tariffs are related to the wholesale market, with final consumer prices yet to be published by the energy regulator ENRE.
President of the Association for the Defense of User and Consumers (DEUCO), Pedro Bussetti, warned that the hikes for consumers could reach as high as 300-500%.
Energy minister Juan José Aranguren, who declared an electricity emergency in December, clarified that this is a necessary measure to in order to reduce state energy subsidies. According to the Argentina Association for Budget and Public Finance Administration, these subsidies accounted for 2.9% of GDP in 2014.
Residents in the city and metropolitan area of Buenos Aires, who have benefited most from subsidies, will be most affected by the increases.
The resolution states that wholesale electricity prices should be “sufficient to cover the cost of supply.”
“Given the existing difference between real costs and current prices, and considering users’ ability to pay and the need to prevent a negative economic impact, it is necessary to approve a single seasonal wholesale price at a national level,” reads the resolution.
However, it adds that the new prices from February, which will be valid until 30th April, will still remain below the cost of production, leaving the possibility of further hikes later this year.
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