Argentina to raise electricity rates in February amid 'energy emergency'

Wednesday, January 27, 2016

Argentine President Mauricio Macri's government will un-freeze wholesale and residential electricity rates, starting in February.

A resolution signed by energy minister Juan José Aranguren cited a need for rates to reflect the true cost of producing power.

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Regulated market electricity rates in Argentina currently average US$30/MWh versus a regional average of US$120/MWh, according to analysts at Raymond James.

The disparity stems from populist price controls under Macri's predecessor, Cristina Fernández de Kirchner.

The policy has incentivized power consumption and restricted the energy sector from making needed investments in additional infrastructure, leading to routine blackouts in capital Buenos Aires during periods of high demand.

The Macri resolution includes price incentives to encourage the rational use of electricity by consumers, and maintains subsidized rates for low-income Argentines.

The measure follows a decree from Macri, signed at the end of 2015, introducing a national "energy emergency" due to the increasing frequency and duration of outages, as well as a precariously thin reserve margin of installed capacity.

Aranguren said at the time that from 2003-14 the number of reported annual power outages reported per user grew to 7.5 from four a year, with the average total duration increasing to 33 hours from six.

Argentina has been forced to import electricity in recent days from neighbors Brazil and Uruguay amid record power demand resulting from high summer temperatures.

Local news outlet InfoBAE published the full resolution, which includes referential wholesale power prices under the new scheme.

State news service Télam reported that the country's two biggest power distributors, Edenor and Edesur, will update prices for residential consumers by the end of this month.