Friday, July 12, 2024

ECONOMY | 18-12-2023 14:20

Milei government issues decree declaring Argentina energy emergency

Javier Milei issues decree declaring energy emergency; Control bodies ENRE and ENARGAS to be placed under trusteeship prior to institution of new boards.

President Javier Milei has signed a decree declaring an emergency in Argentina's national energy sector up to late 2024, both in the electricity generation, transport and distribution segments under federal jurisdiction, and in the transport and distribution of natural gas.

The regulation acknowledges the growing obsolescence of assets of the companies providing these public services, their insufficient adjustment to the needs of the current and future demand, and the lack of investments in renewal and expansion of networks.

It also provides for the inspection of regulating bodies of the sector (ENRE and Enargas) starting in January next year and their placing under trusteeship, until the new boards are appointed according to the selection processes to be implemented by the Ministry of Economy in 180 days.  

The inspectors’ main tasks will be to inform on the inherited status and to start the renegotiation of rates contemplating the involvement of the citizenry, while considering prior recommendations by external control bodies on rate revisions and concession contracts.

The energy emergency has the backdrop of having gone through 2023 with virtually frozen electricity and gas rates. The decree acknowledges previous deficiencies in remuneration schemes to electricity generators and gas producers, which discouraged investments in a context of sustained increase in demand.

It also mentions the fall over the last few years of Bolivian gas shipments, which are key to supply the north of the country, where the thermoelectric power plants are which are today operating to capacity given the shortage of fuel.

The ordered rate revision must strike a balance between rates ensuring the profitability of providers, but without giving up users’ rights, in an adverse macroeconomic context. The result of this process will be key for future investments in a strategic sector where Argentina is clearly lagging behind.



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