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The political decision to keep practically without updating the electricity rates had several consequences in the state accounts. According to technical work carried out by the Undersecretary of Electric Power, who is under the guardianship of Frederic Basualdo, since the Government took office, the percentage of what the user pays on the cost of electricity generation fell from 66% in 2019 to 35% last year.

Electricity rates are made up of four segments: generation, transportation, distribution and taxes. The price of electricity generation that is represented in the bills is the same throughout the country and it is up to the Ministry of Energy to establish it. As of 2019 it is around $2,500 per megawatt-hour (MWh).

The rate that has different performance is the distribution value. Unlike gas, electricity distributors are regulated by the provinces. The only two companies exempted are Edenor and Edesur, which depend on the National Electricity Regulatory Entity (ENRE). Therefore, it is the Government that authorizes when and by what percentage they increase.

Last year, 68% of energy subsidies were concentrated in the electric power sector, where there was an increase of 59%, according to data from the consultancy Economy & Energy, directed by Nicolás Arceo. Specific, US$7.315 million were allocated, who concentrated on cammesa, the state-controlled company in charge of electricity dispatches.

A technical work by the Undersecretary of Electric Power shows the weight of subsidies in electricity generation
A technical work by the Undersecretary of Electric Power shows the weight of subsidies in electricity generation

The report prepared by the Undersecretary of Electric Power to present at the public hearing on the 19th explains that last year, due to the water emergency and the need to use more fuels, became almost 29% more expensive in dollars the cost of electricity generation (it went from US$59 per MWh to US$76). In detail, fuel costs increased 78.6% in dollars.

“The increase in the fuel item is mainly explained by the two variables that make up the cost: price and quantity. As far as the first point is concerned, the cause lies in the incidence of stimulus programs for local production and the increase in the prices of commodities. Regarding volumes, the water emergency and the increase in demand led to a greater use of fuels”, explains the document to which he had access THE NATION.

The historical fall of the Paraná River had a direct impact on the cost of generation, since hydraulic energy is the cheapest of all forms of generation (thermal, nuclear, solar and wind, among others). The drop in flow in 2021 was 8.3% compared to the previous year, and 36% compared to the historical average. This implied that hydroelectric generation was 17.1% lower than in 2020.

Federico Basualdo, Undersecretary of Electric Power, clashed with the Minister of Economy, Martín Guzmán, over the rates
Federico Basualdo, undersecretary of Electric Power, clashed with the Minister of Economy, Martín Guzmán, over the ratesArchive

“In a context of growing demand, almost 5,000 GWh of hydroelectric generation was ‘lost’ from one year to the next. For example, the energy generated by Yacyretá during 2021 was 41.8% less than that of 2018”, says the report. To remedy this situation, thermal power plants that require fuel for their operation were used. This implied that there is an increase in consumption of 0.8% in the case of natural gas, 137.5% in diesel, 82.3% in coal and 29.4% in fuel oil.

On the other hand, with the implementation of the program to stimulate gas production, the annual average local price went from US$2.3 per million BTU (English measure used in the sector) to US$3.4. Gas imports from Bolivia were also reduced, due to the decline of its gas wells, and more liquefied gas (LNG) had to be imported. “The price of this commodity showed an upward trend, which continues today. While in the first months of 2021 it was imported at US$5.4 per million BTU, towards the end of the year it reached values ​​above US$13″says the report. For this year, the Government projects average LNG prices of US$23, more than double what they were in 2021.

With respect to gas, its demand increased 137.5% last year and imported prices increased from US$389 per cubic meter (m3) to US$600 m3 by the end of 2021.

Of the US$76 per MWh that electricity generation cost in Argentina, users paid US$26 (35%) with their fees, while the remaining US$50 was provided by the Treasury through transfers to Cammesa. In the last year of the mandate of Mauricio Macri, the generation cost was US$69 and the users covered US$45 (66%), according to data published by the undersecretary led by Basualdo.

“Due to the circumstances exposed throughout the document, generation costs are expected to increase in 2022 compared to 2021. With the economic recovery that the country is experiencing, it is believed appropriate to advance in the revision of seasonal prices (…) For this reason, it is suggested that pricing be defined in such a way whose final impact on the users’ bill ranges between 17% and 20%”, concludes the report.

To reduce the subsidies and that the rates increase only up to 20%, the big question is what increase Basualdo will authorize to Edenor and Edesur to recompose their income. These companies had an increase of 26% in the last three years.


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