The national government made official a new reduction in subsidies to the rates of electricity and gas services, which will hit the middle and lower sectors squarely, as it reduces the maximum limits of subsidized consumption for users of the less favored classes, in amidst a growing social crisis.
The new guidelines set by the Executive were known yesterday through four resolutions published in the Official Gazette, framed within the “transition stage to move from generalized to targeted subsidies”, which runs from June 1 to November 30. Currently, subsidies are segmented according to three types of households: high-income (N1), low-income (N2) and middle-income (N3).
The area headed by Eduardo Rodríguez Chirillo decided to update the Electric Seasonal Energy Price (PEST) for the May-October period to $57,214 per megawatt hour (MWh) for all residential users. This value has not been updated since last year. In fact, it means that households will receive electricity bills with increases of up to 155.9% for medium income levels, 99.3% for low income levels and 22.8% for high income levels. This adjustment is also due to the changes applied to the subsidized consumption ceilings for levels N2 and N3, which were drastically reduced: 250 kWh/month for middle-income households (against 400 kWh/month previously) and 350 kWh/month month for the poorest, “removing the fact that these users had no limit to subsidized consumption.” Above these consumption levels, users will then pay the full rate, without any type of subsidy (which reaches up to 71.9% in low-income households and 55.9% in middle-income households).
In the case of gas, the Government simplified the tariff scheme by distributing the cost of the subsidy cut among all users, including those in the middle class (who will face increases in bills of 9%) and low class (who will have an increase of up to 32%), according to the values of electricity generation, transportation, distribution and taxes rates. Here, the Ministry of Energy also updated the price of natural gas at the Point of Entry to the Transportation System (PIST) – which is transferred to the final rates – establishing a cost for the May-October period at US$ 4 per million BTUs. N1 (high income) users will continue to pay the full PIST price, since they do not receive subsidies; while N2 users will have a 64% bonus on the price paid by high-income residents and N3 residential users will have a 55% bonus on the PIST.
As in the case of electricity, the Government also lowered the subsidized consumption limits for N2 and N3, unifying them at 41 m3 per month. From this decision, it will be considered “excess consumption” and users will pay the full cost of the service above that consumption level. Likewise, the Government established the possibility of a monthly rate update in all services under the argument that “in times of scarcity and adjustment of State resources, it is necessary to review and reorder subsidies to contribute to fiscal balance without neglecting aid. to vulnerable users.”
The adjustment hits the poor hardest
The middle and lower classes are the ones that felt the most the impact of inflation and the adjustment plan of Javier Milei’s government during the first part of the year, according to the latest “Social Mood” report by the consulting firm Moiguer.
The study indicates that the middle class began to present adjustment levels above the average in the April/May two-month period of this year, although the drop in purchasing power covers almost everyone. According to the survey, 54% of those surveyed consider that their household’s consumption capacity is “worse or much worse” than it was a year ago; while 72% affirm that their household income “is below inflation”; 55% declare that they “have debts”; and 56% had to use savings to pay daily budget expenses.
At the same time, when respondents were asked what “hedonic consumption” they had made in the last 30 days (such as going out or purchasing clothing and technology), 53% and 57% of the members of the lower-middle classes and low, respectively, said “none,” above the overall average of 51%.
