Minister announces 8% increase in power rates

Wednesday, July 30, 2008

Argentina's planning minister Julio de Vido has announced prices paid by the country's largest residential power users will rise 8.1%, state news agency Telam reported.

Specifically, residential clients that consume more than 600kWh every two months will be affected by the price hike.

"In will only affect 24% of households," de Vido said, adding a group of 1.6mn households consumed around 50% of the country's total power capacity.

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Commercial power prices will not increase by more than 10%, according to Telam.

The rate increase will allow the government to avoid new subsidies for the country's power sector, according to the minister.

de Vido added the 100% of the increased revenues will be used for investment plans already submitted by generators and distributors.

While some residential consumers will end up paying 8% more for power, distributors should see their take rise by around 20%, director of power consultancy Fundelec Cecilia Laclau told BNamericas.

"It reality, distributors will see revenues rise around 20%," Laclau said. "The end-rate users pay includes fees for both distribution and generation. What's happening here is taxes will be less. The final increase is 8%, but distributors will see their take rise 20%."

An increase for power generators has yet to be determined and was not included in de Vido's announcement, she added.

Around 35% of what end clients pay currently goes to generators and another 35% goes to distributors, according to Laclau.

"It's good for the industry," she added. "At least something is happening."