Government Officially Announces Increases Up to 300%

The upcoming electricity rate tables will see average increases of up to 300% in the metropolitan area (AMBA) and monthly bills that used to be $7,500 could now reach $30,000. This significant increase is attributed to the impact of the electoral reformulation on the ballots. The categories and distribution cost will be borne by the 5.8 million users of Edesur and Edenor.

Last week, the Ministry of Energy estimated that the adjustments would range between 65% and 150%, depending on the category and income level. These are currently divided into three levels: N1 (high), N2 (low), and N3 (medium). However, official sources recently confirmed that the increases could be double these percentages for certain categories.

The tariff tables for Edenor and Edesur were published by the Government last Friday, and similar tables for electricity transporters across the country were published on Monday. One significant change is the reduction of residential categories (R) from 9 to 4, which has resulted in a flattening of the scales that previously determined higher rates based on consumption levels.

Previously, the first tier (R1) included those who consumed up to 150 kwh per month, while the last tier included those who consumed more than 1,400 kwh per month. Now, R2 and R3 have been combined into R2 (between 151 and 400 kwh per month), R4, R5, and R6 have been combined into R3 (between 401 and 600 kwh per month), and R6, R7, and R8 have been consolidated into R4 (more than 600 kwh per month).

As a result, an erstwhile R7 user, who was in the middle of the table, has now been moved to the top as an R4 user. These changes are being implemented gradually, so N2 and N3 Residential Users are less affected while they await a hearing for the reallocation of subsidies scheduled for this month, according to Energía.

However, the impact on bills could be greater for those with lower purchasing power. Consultancy Economía y Energía suggests that due to the changes in fixed and variable costs and assuming typical consumption, a high-income R4 (formerly R7) user would see their bill rise by an average of 239%; a middle-income user by 261%; and a low-income user by 300%.

Patricia Charvay, an economist at Economy and Energy, explained that grouping the categories has a cascading impact on different levels of consumption. Another specialist from the energy sector noted that the consolidation of R categories amplifies the impact on bills.

The Government asserts that in terms of relative percentages (comparing current values with the previous ones), a single generalized increase cannot be indicated since there were different user categories who paid varying prices for the energy and power they consumed from the Wholesale Electricity Market.

The “rebalancing” within categories has drawn the attention of energy specialists, who note a high level of “variability” in the final impact of the increases among different consumption segments. Charvay said, “At level 2 (low income), the lowest increase we’re seeing is 90% for a former R3, and the highest for an R7 (now R4) is 300%.”

These changes are part of the Government’s plan to have end users bear the cost of supply and reduce energy subsidies. In January, this item fell by 64% year-on-year in real terms due to inflation and ongoing fiscal adjustment. Economy Minister Luis Caputo has committed to the IMF to reduce energy subsidies by 0.5% of GDP in 2024 (from 1.6 to 1.1%).

The increases formalized last week only reflect one component of the rate, the distribution cost. The price of wholesale energy has not yet been increased. However, these increases already exceed the IMF’s estimates, which anticipated “initial increases in electricity rates (more than 200 percent) and gas (more than 150 percent) starting in February, after public hearings.”