Saturday, January 30th 2016 - 10:45 UTC

Argentina ends power subsidies; some bills could increase by as much as 500%

Argentina's energy minister on Friday announced new power rates on the back of subsidy cuts that could see the bills of some consumers jump five-fold, saying that a near total freeze on tariffs in parts of the country for years had left the power grid “on the brink of collapse.”

Minister Aranguren said the target was reducing subsidies by US$4 billion this year as part of a drive to reduce a gaping deficit that widened sharply

“The subsidies for the generation of electricity in 2015 was around US$10 billion, which is just under 2 points of GDP” Aranguren told a news conference.

As of Monday a household in the capital which consumed 180 KW per month would see its bill rise to 150 pesos from 25 pesos “roughly as a cup of coffee”.

“Argentina has spent US$51 billion on power subsidies since 2003”, Aranguren revealed.

 Minister Juan Jose Aranguren said the government of newly-elected Mauricio Macri targeted reducing subsidies by US$4 billion this year as part of a drive to reduce a gaping deficit that widened sharply under the government of former President Cristina Fernandez.

“The subsidies for the generation of electricity in 2015 was around US$10 billion, which is just under 2 points of GDP” Aranguren told a news conference. “With our new tariff policy...we aim to save $4 billion.” This, he said, “represents 5.6 million in Universal Child Allowance cash transfers”.

In Argentina the federal government only controls rates in the capital and its suburbs. Provincial governments outside of Buenos Aires set their own rates.

Aranguren said the old subsidy system had favored residents of the capital Buenos Aires, who typically pay rates five times lower than in other provinces because rates there have been largely frozen for more than 13 years. Buenos Aires City also enjoys the highest per capita income in Argentina.

“Over the past years, for not having applied the mechanism that in 2006 was agreed by the SIGEN (Comptroller's office) and submitted to Congress, without the Parliament addressing it, users in the capital city and Buenos Aires paid for 5-time lower value compared to the rest of the country,” he explained.

“The situation created a clear deterioration in the service and that led us to declare the energy emergency,” he said.

In practical terms under the new rates, a household in the capital which consumed 180 kilowatts per month would see its bill rise to 150 pesos (US$10.74) from 25 pesos - a price the minister noted was roughly the same as a cup of coffee.

However Aranguren explained the new chart that includes a social tariff will allow certain users to keep subsidies for their power bills on the basis of income and assets owned. There will also be cost-saving incentives for consumers who reduce their consumption from last year.

Leading utility firms Edenor and Edesur, which distribute power to metropolitan Buenos Aires have posted losses in four of the past five fully reported financial years as power rates stayed rock bottom even as inflation surged. While the energy emergency remains effective the power distributors are banned from giving out dividends.

The new rate structure comes after the Argentine government set new wholesale prices for electricity that will apply nationwide from Monday, February first. Aranguren said that the rates would be reviewed again in six months time.

“Argentina has spent US$51 billion on power subsidies since 2003”, Aranguren revealed.

40 comments Feed

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1 Briton (#) Jan 30th, 2016 - 11:10 am Report abuse
Then ordinary argies should start to buy up all the candles,
they may well need them.
2 Brasileiro (#) Jan 30th, 2016 - 11:43 am Report abuse
Macri is the Donald Trump Spanish.
3 redp0ll (#) Jan 30th, 2016 - 11:58 am Report abuse
Subsidies? Uruguay sells power to RA @ 7 dollars a megawatt but buys from the wind farms @ 69 dollars. See article in El Observador. Who pays the difference? The Uruguayan consumer every month.
4 Captain Poppy (#) Jan 30th, 2016 - 12:55 pm Report abuse
With the electric companies allowed to make a profit, it is expected upgrades to the infracture will happen. Time will tell.
5 Marti Llazo (#) Jan 30th, 2016 - 01:42 pm Report abuse
What the article doesn't mention is that the average Bs As consumer pays about US$3 a month for electricity, so a 500 percent increase is still nothing. In fact the average monthly electrical bill for a residence in Bs As is expected to be only about US$11. But of course they (and the leftist media) will scream about it because this is Argentina, land of the assumed right to a free lunch and a monthly electric bill of US$11 is a violation of human rights.

The present (Kirchnerist) price controls have encouraged a great deal of waste in energy use, and of course the grid in the capital tended to collapse with alarming regularity. The maintenance of the high subsidies was another sneaky Kirchnerist method to give the appearance of lower inflation.

There should be an article on the Kirchnerist subsidies since it could be a masterpiece revelation of Peronist corruption, cronyism, and populist politics.

The XII Región in Chile has a similar subsidy for natural gas. The subsidy is about 80 percent of the market value of the natural gas, so of course it is wasted. People heat their houses and offices at 25 to 28 degrees C in winter and naturally don't invest in insulation and fixing leaky construction, which is notoriously energy-inefficient. I've seen houses there with zero outer-wall insulation and zero attic insulation.

Utility subsidies of this nature lead to serious waste of energy resources because there is no incentive for intelligent energy conservation and efficiency. So the Macri government move is ultimately a good one, getting the country at least close to the sensibilities of the past century.
6 Conqueror (#) Jan 30th, 2016 - 02:27 pm Report abuse
USS10.74 a month? Shouldn't that be more like US$100.74 a month?
7 Marti Llazo (#) Jan 30th, 2016 - 03:35 pm Report abuse
@6 No, the current average Bs As residential monthly electricity cost is around US$3.00.

If you read Spanish (or at least argentensis) you can follow the discussion in the local media. But as one article said with respect to the absurdly subsidised current rates:

No existía otra ciudad en la que una boleta de luz fuera inferior al precio de un viaje en taxi o una pizza.

(There is no other city where the electric bill is less than the price of a taxi ride or a pizza)

Or as BBC puts it, using Prat-Gay's words, those who paid about US$10 a month for electricity will soon be paying about the price of two pizzas (Pizza Price is the new monetary standard, similar to the Cost Of A Big Mac standard).

”Pero una factura que se pagaba $150 (US$10,7) y pasa a $350 (US$25) son (una diferencia de) 200 pesos, que es también (igual a) dos taxis o dos pizzas”,
8 ChrisR (#) Jan 30th, 2016 - 05:58 pm Report abuse
On the east coast of Uruguay we are paying U$D90/month or about GBP62/ month for my fairly large casa. That is after a rise in January of 10% approx.

I have no idea how the locals cope with such high prices.

@ 3 redp0ll

I understood Mujica sanctioned the supply of electricity to Argentina when their system collapsed some three years ago.

Does this continuance mean that Vasquez is unwilling or unable to stop us paying U$D62 / Megawatt to subsidize Macri or is there something else at play here?
9 Conqueror (#) Jan 30th, 2016 - 06:19 pm Report abuse
@7. Why don't you assholes pay an honest amount? How much are you stealing from Paraguay?
10 Marti Llazo (#) Jan 30th, 2016 - 06:29 pm Report abuse
@9 Who are you thinking of when say “you assholes” ?

The tariffs are the result of Kirchner government subsidies for the Buenos Aires province. There is not a single rate paid throughout the country and the rates in the several provinces vary greatly. We pay considerably higher rates in the provinces.
11 golfcronie (#) Jan 30th, 2016 - 07:06 pm Report abuse
I thought the Dique “ El Chocon” in Neuquen Province was supplying BA with Hydro electricity.
12 roray (#) Jan 30th, 2016 - 07:32 pm Report abuse
@8 wow you have a fantastic deal as we live on the coast of Rocha, Uruguay also in a fairly large newly built casa; but our monthly UTE Factura is around $250.00. The family consists of my wife, a dog & 2 cats but we do have a clothes dryer pretty unique for here.
13 axel arg (#) Jan 30th, 2016 - 07:34 pm Report abuse
During the campaign, many members of kirchnerism warned people about the austerity measures that Macri would take, in case of winning the election, however, he victimized him self, and accused C. F. K's government of making a fear campaign against his party, beside, he denied all the accusations.
The new president often says that he wants zero poverty in Argentina, however, since he is in office, all measures he has taken have been regressive in social terms, there hasn't been not even one policy that benefits most of our citizizens. Anyway, i can understand that perhaps it was necesary to make a cut on those subsides, in fact, Cristina did it also in different opportunities, but her government continued to promote free negotiations between businessmen and workers, that aim to increase the salaries of workers, with the purpose of mitigating the deterioration that a devaluation, or the elimination of subsides provoke on people's buying power, however, the intention of the new government, is to put a limit for the new rases, which was expressed by ministers Prat Gay and Triaca.
It's pretty obvious and necesary that most of our people will have to be more responsable when they choose a president, they should search better information about them, although Macri seems a good guy and friendly, he is the president of those citizens who don't need of the state, in fact, all his polices have always aimed to improve the life of that social sector, even when he was the chief of government of Buenos Aires city, that's why he cut the budgets for health and public education, but increased all those that used to go to private schools.
In the case of Cristina, despite all the legitimate critics that anybody can make to her 2 governments, and beyond how arrogant, narcicist and bad she seems for some people, almost all her policies benefited the whole nation.
14 Marti Llazo (#) Jan 30th, 2016 - 07:44 pm Report abuse
Never thought I would see this: Chile is going to sell natural gas to Argentina! 5.5 million cubic metres a day, from Chile to Argentina. Chile buys the gas from southeast Asia and will re-sell it to Argentina starting in the winter (our winter).

And not just natural gas, but electricity as well !

No idea how Argentina is going to pay for it.

A real tribute to Kirchnerist incompetence and Chilean investment. There is a long story behind this. It seems as though Chile has invested in substantial LNG reception and storage capability and Argentina, well, Argentina is going to rely on Chile's infrastructure. Things have come a long way since that natural gas was flowing the other way through those pipelines.
15 redp0ll (#) Jan 30th, 2016 - 07:47 pm Report abuse
@11 yes Ell chocon and the other dams on the Limay river supply current to BA
@9 Paraguay exports over 90% of the electricity it generates. Brazil buys most of it at U$D 2.50 a Mgw which naturally the Paraguayans are not happy with.
Argentina takes the entire production of Yacerita at what price I don't know but during the last govt they were often six months in arrears.
@8 I don't know whether RA ever paid for the current Mujica sent them, most of which was supplied by firing up the thermal stations. Perhaps I have over simplified the situation. Suggest you read the article which goes into more detail..
One good thing. Until the 500 Kv connection was put in to Brazil, Uruguays only customer for surplus power was Argentina. Now that's changed and perhaps surpluses can be sol to the highest bidder
16 chronic (#) Jan 30th, 2016 - 08:07 pm Report abuse
Imagine that.

rottingroadkillians actually paying for what they their selves used.

How novel an idea.

The entitlement society starts to unravel.
17 redp0ll (#) Jan 30th, 2016 - 08:23 pm Report abuse
@12 7,500 pesos a month? I fear you are being ripped off by somebody amigo
18 yankeeboy (#) Jan 30th, 2016 - 08:26 pm Report abuse
Axel is the perfect example of why Socialism fails.

He wants people to vote for whomever will give the most free stuff.

Axel is dumb
Don't be like Axel.
19 Briton (#) Jan 30th, 2016 - 08:35 pm Report abuse
Nothing is free nowadays,
someone somewhere has to pay for it,

and this usually ends up being the poor.
Axel must be one of the rich ones.
20 roray (#) Jan 30th, 2016 - 08:58 pm Report abuse
@17 Really last 2 facturas from UTE were $6568 u & $6849 u. Approximately $215.34 & $225.30 @ 30.5/$. My November cost was $8808 u. $288.79
21 Marti Llazo (#) Jan 30th, 2016 - 09:27 pm Report abuse
Axel, on CFK: “ almost all her policies benefited the whole nation.”

Let's look at that.

CFK completely destroyed the Argentine armed forces, leaving the country unable to defend its frontiers from the explosive growth of narco-trafficking that has taken over a good part of the north.

Thanks to CFK's domestic policies, Argentina became rated as the worst place in all of Latin America to do business.

Under CFK's social policies, fewer than half the Argentine adolescents complete secondary school.

Thanks to CFK's social policies, about 28 percent of the population is below the poverty line, which represents a significant growth in both the number and percentages of poor in Argentina.

Thanks to CFK's economic policies, inflation for 2015 turned out to be around 30 percent, among the worst in the world.

Thanks to CFK's cultural policies, residents could not order books from outside of Argentina.

Thanks to CFK's domestic policies, Argentina's aircraft development programme completely disintegrated.

Thanks to CFK's economic policies, Argentina's infrastructure has crumbled.

Thanks to CFK's economic policies, Paraguay now exports more beef than Argentina, and domestic prices for beef are off the graph.

Thanks to CFK, Alberto Nisman was murdered.

And let's not forget where CFK's Argentina ranks in terms of corruption.

Tell us again, Axel, how all of this has benefited the whole nation.
22 chronic (#) Jan 31st, 2016 - 12:50 am Report abuse
Well said.
23 Don Alberto (#) Jan 31st, 2016 - 01:35 am Report abuse
13 axel arg is here with his usual idiotic nonsense “... Cristina ... almost all her policies benefited the whole nation.”

The clown is completely off his rocker.

Tell us, axel arg, how an enormous debt is to the benefit of the whole nation, any nation for that matter.

All the hospitals are paying their staff with a five months delay, the kirchnerism has left a huge deficit of many billions and a trade deficit for the first time since 1999. The kirchnerist governors who have been replaced have also left huge deficits; in Tobias' beloved Mendoza there aren't money to pay the January wages to the public servants, ex-governor Pérez left a deficit of about five billion pesos and beauties like large cultural centers with rented light and sound systems.

Read some Argentine local newspapers from Córdoba, Mendoza, etc. and get a real impression of how bad it is in Argentina - not where you are sponging on the human beings.

La Canasta Alimentaria subió 70% en un año en Mendoza

La provincia Mendoza habrá problemas también para pagar noviembre

Cuentas y obras, los déficits de Pérez

Estimamos un déficit de 4.500 a 4.800 millones para 2016

Pérez reconoció, antes de irse, deuda millonaria

Paro en Salud por los salarios que el Gobierno paga otra vez atrasados y escalonados
24 Jo Bloggs (#) Jan 31st, 2016 - 11:32 am Report abuse
Dear President Macri,
Congratulations on your election victory. Sorry I haven't written before now but it's been quite some time since I've looked at Mercopress. I would like to applaud you for your many positive actions since coming into power in an attempt to get Argentina back on track after, well, after...her.

I know how busy you are and I know the Falkland Islands is not a high priority to you so I am sorry to bother you with this but I wanted to check to see if you realise how much money your government spends to subsidise LAN Airlines to stop at Rio Gellegos twice per month on its flight to Mt Pleasant. You see this stop makes no commercial sense to LAN so the Argentine Government pays LAN to make the stop.

In line with your policy to reduce subsidies and make users pay I suppose you'd be interested to know the full extent of such measures your government is currently providing. LAN is about to increase its aircraft size so I guess they'll be increasing the fee for this enforced, otherwise non-profitable stop and that would make no sense and would be at odds with your policies.

That's all for now and I hope this information has been useful for you and good luck with trying to get the old girl back into some sort of respectable shape again so that the world stops laughing at her. Good luck with turning Argentina around also.


25 ChrisR (#) Jan 31st, 2016 - 12:24 pm Report abuse
@ 20 roray

Before I can make any sensible comments please answer the following:
1) What type of contract are you on? I am on ADT 2 Urbana densidad media.
2) What was the consumption for those two facturas, in kWh, shown in the pink coloured box?
26 Marti Llazo (#) Jan 31st, 2016 - 02:03 pm Report abuse
The news articles on the Buenos Aires new electricity rates have provided some reminders about the mendacious and misleading nature of Peronist and other leftist reporting on Argentina. So here is something to chew on.

Buenos Aires province has the lowest costs for residential electrical service in the region (with the possible exception of Paraguay) . Even after the tiny increase in the new tariffs.

For low-income users (retired, etc) the new schedule provides for a fixed rate of 14 pesos (about US$1.00) a month and no charge for consumption up to 150 kWhr/month. Their bills are paid by public monies and the utilities. Somehow, the Peronists find this to be heartless.

For about 70 percent of the households in the affected area, the actual increases in the monthly costs are estimated at between 4 and 56 ARS (about US$0.29 and US$4.00), assuming no curtailment of consumption. And since electricity has been appearing to users to be essentially free in this province, excess consumption has been rife. But of course the cost is still there. It's part of the billions of dollars that Argentina pays for importing fuel and dealing with overstressed infrastructure. Which raises some interesting questions. Why isn't the usual enviro-Left viewing this as an energy consumption reduction opportunity and instead weeping about insignificant costs to the set of consumers who are most capable of paying for their consumption ?

Fortunately, we're starting to see discussion in some of the more responsible sectors here about means for reducing excess electricity use and achieving greater efficiencies.
27 Don Alberto (#) Jan 31st, 2016 - 02:58 pm Report abuse
Marti Llazo writes: ”For low-income users (retired, etc) the new schedule provides for a fixed rate of 14 pesos (about US$1.00) a month ... Somehow, the Peronists find this to be heartless.“

If the Macri government were to give electricity, gas and water away for free to anyone earning less than the price of the ”canasta”, the Peronists would declare this to be heartless.

Anything any non-peronist government does, will be declared heartless by the Peronists, lower prices or higher prices, new subsidies or removal of subsidies, ...
28 ChrisR (#) Jan 31st, 2016 - 05:37 pm Report abuse
I learnt a long while ago that if you give anybody something for nothing they will value it at nothing.

Charge them a realistic price and it is their choice to buy it or not BUT they will covet it forever.
29 Conqueror (#) Jan 31st, 2016 - 06:04 pm Report abuse
@9. Try this simple process. Where does your electricity come from? Not just the company that bills. Who generates it? How much does that cost? How much does argieland actually pay? How much is argieland actually ripping off the producing country?

Do something exceptional. Think! Not the bit of scum that uses that “name”.

Read the various comments. Never mind “we're only paying $3.00 a month”. Try noting how much others are paying. How about this? Should the rest of South America pay what you say you pay? Or should you pay what they pay? How about if other SoAm countries pay $250-300 per person? Shouldn't you?
30 Marti Llazo (#) Jan 31st, 2016 - 07:43 pm Report abuse
@29 “How about if other SoAm countries pay $250-300 per person? Shouldn't you?”

There is enormous variation in the costs of electricity as you go from place to place here [within Argentina] and that variation is not just the effect of price controls or subsidies but largely the costs associated with production and infrastructure.

I asked some friends in nearby Punta Arenas (Chile) and I was told they their rates are not subsidised but established by a government utilities agency (some low-income people do receive a publicly funded discount but I think it's only about US$10 or so off their bill). As production costs for the utilities (Edelmag, in this case) vary, the utility can apply for rate increases. Edelmag pays market rates without subsidy for its hydrocarbon fuel for production. Customers pay a 19 percent IVA (that's VAT, to you) which goes to the national treasury. Edelmag is a for-profit sociedad anónima and pays investors a dividend. The result: our Chilean friends (household) pay about US$75 equivalent per month and a bit more during winter months. Here in Río Gallegos, with similar climate conditions, the average residential electrical bill (including subsidies) is around 200 ARS or about US$14 a month.
31 psql (#) Feb 01st, 2016 - 10:00 am Report abuse
Martin, you have to understand the culture here, “Conqueror” is British, and the “ass hole” is only a warm, and friendly way to talk to Argentinians. Barbarians are like that, they do not mean it, they are not bad, really.
There are just primitive. Please Martin try to understand them, and do not get offended.
32 golfcronie (#) Feb 01st, 2016 - 02:09 pm Report abuse
I pay for 1 month the following
ELECT 135 kWh £ 15.50 usage and £ 3.00 distribution costs
Gas 6kWh £2.75 usage and £ 3.00 distribution costs
ELECT 1kWh costs £0.1146 Distribution costs £ 0.10 per day
Gas 1kWh costs £ 0.0395 Distribution costs £0.10per day
33 axel arg (#) Feb 01st, 2016 - 03:56 pm Report abuse
Although i really think that your lecture about C. F. K.'s government isn't serious in absolut, unless you neather missrespected me, nor undersestimated me, as some other people did, that's why i'll answer your question.
Firstly, let me remind you that after one year of Nisman's death, we still don't know whether what happened with him was a murder or a suicide, so, what you are doing with your accusation against the ex president, is characteristic of a misserable person, only justice can determine the causes of Nisman's death, not the cretins from our hegemonical press, sabelo.
On the other hand, it's pretty obvious that she committed mistakes, in fact, i have signalized them in many of comments along these years, but it's undeniable that her policies helped to keep the jobs of millions of compatriots, in a terrible context of economic crisis in many countries.
I usually wonder, what would have happened, if the president in 2014 had been Macri and not Cristina, he would have commited the stupid mistake of paying for the usurious sentence determined by griesa, as he had expressed that year, ''hay que ir al tribunal de Griesa, y lo que Griesa termine diciendo hay que hacerlo'', there is no doubt that we would be in a much worse situation than now.
What worries me the most, isn't the elimination of the subsides, in fact, Cristina did it also in different opportunities, i'm very worried about the intention of the government of putting a limit to the new rases (paritarias), which is something undedited in the last 12 years, if it finally happens, EVERYBODY will be hardly prejudiced, even those who now say that Macri is a genious.
34 yankeeboy (#) Feb 01st, 2016 - 04:07 pm Report abuse
Nobody is underestimating you Axel
Your stupidity is boundless
as everyone can see
35 ChrisR (#) Feb 01st, 2016 - 06:09 pm Report abuse
@ 32 golfcronie


WTF do you live in, a phone booth? :o)

We are no heavy users and ours is about 500kWh/m!
36 Marti Llazo (#) Feb 01st, 2016 - 06:11 pm Report abuse
@33 “ i have signalized them in many of comments along these years, but it's undeniable that her policies helped to keep the jobs of millions of compatriots..”

Es decir, ñoquis. ¿ Sabés que son ñoquis?


@33 “, i'm very worried about the intention of the government of putting a limit to the new rases”

Yes, gotta watch those rases.

But since you are argento, you are genetically unqualified to understand measures intended to control inflation. After all, where there is no inflation, there is no Argentina.

@33 “...paying for the usurious sentence determined by griesa”

There is no such thing as a “usurious sentence.” If you are referring to the rates of interest on the unrestructured bonds that the courts have determined are part of the debt payment contract, do yourself a favour and discover that the interest rates were consistent with conventional rates at the time for that sort of debt. Do yourself another favour by learning what happens when you don't make payments and interest and penalties accrue. And what happens when you try to sell debt without Collective Action Clauses and are thus barred from requiring that all creditors accept the same restructuring solution. Do you understand the concepts of contracts, Collective Action Claudes, interest, payment of debts, money, and related subjects?

@33 “...even those who now say that Macri is a genious.”

Compared to some, yes, Macri is unquestionably a genius.
37 golfcronie (#) Feb 01st, 2016 - 06:21 pm Report abuse
Divorced and live alone, but spend a lot of time away from home, golfing, gym and outdoor pursuits.
38 ChrisR (#) Feb 02nd, 2016 - 02:10 pm Report abuse
@ 37 golfcronie

You need to watch those 'outdoor pursuits' in case one of them turns into an inside pursuit.

Then what will your electric bill cost then? :o)
39 ynsere (#) Feb 03rd, 2016 - 02:14 am Report abuse
ChrisR, Redpoll & Roray

I pay about USD 150/month for electricity for a largish flat in Punta del Este, with electric heaters and a/c.

I always rent out in January; I don't like crowds. Now I understand why my Argentine tennants were so upset about the electricity bill my administrator submitted for the month.
40 ChrisR (#) Feb 03rd, 2016 - 05:44 pm Report abuse
@ 39 ynsere
“Now I understand why my Argentine tenants were so upset about the electricity bill my administrator submitted for the month.”

Glad to see you back and that you still have your sense of humour! :o)

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