Tariff conflict heats up, leaving Buenos Aires public spaces unlit

Wednesday, July 25, 2012

The dispute in Argentina's power sector surrounding tariffs and subsidies continues, now exacerbating tensions between the federal government and capital Buenos Aires city government, led by mayor Mauricio Macri, and prompting troubled distribution firm Edesur to cut power supply to some parts of the capital.

Planning and investment minister Julio de Vido said that the municipal government's decision to increase power tariffs by 28% is "clearly moving away from the national energy policy which the government has been following since 2003."

"It's a question of equality," de Vido said during his trip to Venezuelan capital Caracas, according to a report from Argentina's state news service Télam.

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"Those provinces who redefine tariff policy will have an equal proportion of national power generation subsidies deducted," de Vido said.

In response to the decision by Edesur to cut power supply to some parts of the capital, de Vido said "the problem is not subsidies, but that the city government hasn't paid its bill."

Local press reports say Edesur's decision to cut off power supply to some of Buenos Aires' public spaces was prompted by a 50.9mn peso (US$11.1mn) debt owed to the firm by Macri's administration.

The company previously issued a statement blaming the government of the city of Buenos Aires for non-payments of debt to market administrator Cammesa, saying changes to subsidies are behind the problem.

According to reports, Edesur's debt originated from the failure of Macri's government to pay power bills at the unsubsidized rate since subsidy reductions were applied in December 2011.

President Cristina Fernández announced in November 2011 the widespread removal of utility subsidies, but following a disappointing reaction to a voluntary scheme to relinquish subsidies only around 4% of the population is paying unsubsidized rates.

In addition to utility subsidies, power tariffs have been kept artificially low after emergency measures were introduced in the wake of the 2001 crisis.

Edesur, a subsidiary of Italy's Enel through Spanish power giant Endesa, has repeatedly requested tariff increases to reflect growing costs and allow the company to meet network maintenance requirements.