Utilities defend rate hikes amid protests

Bnamericas Published: Tuesday, February 10, 2009
Natural gas and power distributors in Argentina are defending the government's decision to reduce subsidies that artificially lowered rates for larger residential and commercial users, state news agency Télam reported. "There has now been a consensus for a good amount of time in both business and academic circles that subsidies should be limited only to the sectors of society that most need them," Argentine power chamber CEADE said in a statement. "Those who can pay the real cost of power and gas should be," the statement said. Natural gas and power distributors have seen some resistance from clients in paying high rates and protests have been held across the country, an industry analyst told BNamericas. "About 80% of affected clients have paid the higher bills, but around 20% have not," the analyst said. Several nationwide protests have been held while Argentina's public defense council is suing to have rate increases overturned. "Utilities are not going to be able to cut off service to those who don't pay until the matter is taken care of in court," the analyst said, adding it was unlikely the rate increases would be reversed. Argentina's planning ministry in November passed regulations to eliminate generation subsidies for residential, commercial and industrial users that use more than 1MWh every two months. The measure affected about 7.5mn customers. In nominal terms, actual increases ranged from 70-400%, depending on the municipality, according to the analyst. Natural gas distributors also were allowed to raise tariffs for users consuming more than 800m3 of natural gas every two months. The planning ministry in July 2008 announced it would raise power rates by 8.1% for residential users who consumed more than 600kWh every two months. Argentina has heavily subsidized or regulated natural gas and power prices giving the country some of the cheapest energy prices in Latin America. The government, for instance, spent almost US$7bn subsidizing imported fuels in 2008, although the budget for 2009 reduces fuel subsidies to US$2bn. Argentina's federal government has been spending about US$1bn/y in total to subsidize power prices in the country, BNamericas previously reported.

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