The Government made official the beginning of the transition period towards a new energy subsidy scheme that will have a double impact that will further tighten the consumer’s pocketbook. On the one hand, gas and electricity rates will suffer increases due to the withdrawal of State assistance, and on the other, they may also become more expensive because the maximum limits on subsidized consumption will be reduced.
These measures will especially impact middle class households and users who are in poverty. In addition, it continues with the elimination of national State aid to high-income or high-net-worth families. This will translate retroactively to June 1 into an increase in electricity and gas rates for all residential users in the country.
In the case of electrical energy, the increase can in several cases exceed 155% at the national level, as the Government itself admitted yesterday. In natural gas through networks, the increase is only around 6%. It is expected that during the day the Government will provide more details.
In all cases, furthermore, the increases are cumulative in relation to the rates that were already paid previously. In both electricity and gas, there were adjustments of between 300% to 400%, mainly for higher-income households.
Currently, subsidies are segmented according to three types of households: high-income (N1), low-income (N2) and middle-income (N3). The N2 and N3 are those that cover the least part of the costs of the energy they consume.
Regarding electrical energy, the area headed by Eduardo Rodríguez Chirillo decided to update the Seasonal Energy Price (PEST) for the May-October period to $57,214 per megawatt hour (MWh) for all residential users.
The regulations established that for high-income households the impact of the PEST update is total. While for low-income (Level 2) and medium-income (Level 3) households, a bonus of 71.9% and 55.9%, respectively, will be applied to that value.
In this way, Energía calculated as an example, considering average residential consumption of 260 KWh, that the bills will go from: N1 will go from $24,710 to $30,355; N3 will go from $6,585 to $16,850; N2 will go from $6,295 to $12,545.
Likewise, new consumption limits were set, so users who exceed them will pay more for electricity service. High-income households have no caps. While for those with medium incomes, the new cap on the subsidized amount will be 250 kWh/month, replacing the previous 400 kWh/month.
Those with low incomes, for their part, will have a maximum subsidized consumption of 350 kWh/month, “removing the fact that these users had no limit to subsidized consumption, encouraging efficient and responsible consumption with this measure,” Energy specified.
Regarding the new consumption limits for electrical users without access to the natural gas service through networks and indiluted propane gas through networks, located in certain bioclimatic zones, it was set at 500 kWh/month for the N3 and 700 kWh/month for the N2, only for the period from June 1 to August 31, 2024.
From the energy area they explained that “consumption less than the established limits is called base consumption”, so “consumption at the previously established limits will be considered surplus consumption and will be paid at the PIST and PEST prices set by the Secretariat, without bonus.”
> The goal of adjustment
The Government’s objective is to multiply fiscal savings in subsidies, and lower them from the equivalent of almost US$ 9,700 million in 2023 (1.5% of GDP) to between US$ 5,000 million and US$ 6,800 million (0. 8% to 1.1% of GDP), according to the consulting firm Economía & Energía.
> Average value of gas bills
The Ministry of Energy also updated the price of natural gas at the Point of Entry to the Transportation System (PIST), which is transferred to the final rates, establishing the cost for the May-October period at US$ 3.30 per million of BTUs.
N1 (high-income) users will continue to pay the full PIST price determined since they do not receive subsidies. N2 users will have a 64% bonus on the price paid by high-income residents, while N3 residential users will have a 55% bonus on the PIST.
Regarding the caps or subsidized consumption limits, in the case of natural gas, the N1 do not have caps. Middle-income households maintain current limits, according to the distributor, while for low-income households, the same consumption limits apply as for N3.
During June 2024, at the three segmentation levels, the average value of the final monthly invoices will be the following: N1, with an average consumption of 149 m3, will go from $25,756 to $28,142; N3, with an average consumption of 171 m3, will go from $24,465 to $26,865; N2, with an average consumption of 159 m3, will go from $15,638 to $20,797
From Energy they clarified that “specific subsidy regimes such as the Social Tariff and Cold Zone are maintained.”
