According to a report prepared by the consulting firms Economía & Energía (Ecen), directed by Nicolás Arceo, and PxQ, by Emmanuel Álvarez Agis and Cynthia Paz, the households of the Buenos Aires Metropolitan Area (AMBA, which groups the City of Buenos Aires and the Conurbano parties) allocate the highest proportion of their income in the last 30 years to paying for electricity and gas services.
To reach that point, a series of factors are added. On the one hand, the escalation of tariffs that Javier Milei’s government has applied since last April and which continue this month and in the coming months. On the other hand, the marked decrease in the purchasing power of salaries, which measured in dollars is at its worst level since 2004, while the rates of energy public services are strongly influenced by the value of the dollar, which took a sharp jump on the last 12 from December.
The data in the report highlights the magnitude of the tariff that the far-right government intends to carry out. This is because according to the study, the average monthly value of electricity and gas bills is equivalent to 5.1% of the Ripte, which is a particular measurement of salaries made by the Ministry of Labor and is also used to calculate rent increases.
This level is half of what the government considers should be the portion of income that each household would have to allocate to paying for these services, its so-called “energy basket,” which it calculated at 10%. If it is taken into account that Ecen and PxQ’s analysis is for a salary, while the government speaks of family income, it is observed that the rates that Javier Milei and his team intend to impose are much higher than what has been done to date .
The current incidence of energy expenditure varies depending on which consumption segment the home is in. In those located in level 1 (the one with the highest income according to the segmentation established last year and which has the lowest percentage of subsidies), electricity and gas bills represent on average 6.4% of the income measured by the Ripte. In March, that percentage was 4.1 percent.
In the case of the other two levels of consumption, the relationships are different: in level 3 (average income), it reaches 4.8%. Three months ago it was at 1.5% of the Ripte. And in level 2 (vulnerable sectors), it is at 4.1%, this is due to the incidence of subsidies, which are the highest, but in March it was 1.5%.
“If we take only the expense destined to face an average natural gas bill, it can be seen that the current 3.1% with respect to the Ripte constitutes the highest percentage in the entire historical series, surpassing the period from January 2018 to December 2019 when it averaged 2.7%, with a peak close to the current one at the end of 2018,” the report stated.
Waiting list rates
The weight of electricity and gas rates on income could be even greater if the government had not decided to put a stop to rate increases due to their direct impact on inflation. In seeking the shock of a slowing shortage, the government privileged the photo that led to an increase in the consumer price index of 4.2% in May.
This brake was applied after a sharp increase in the rates of distributors and transporters, both for electricity and natural gas. “In the first months of the year, the increases in electric energy (February) and natural gas (April) focused on rebuilding the added value of distribution and transportation and, to a lesser extent, on raising the price of energy paid by demand. The increase in energy prices was concentrated in high-income residential users and commercial and industrial users,” the report recalled.
Then, “although monthly adjustment mechanisms were announced” in transportation and distribution rates “in order to maintain income in real terms, they have not been implemented to date,” he added.
But the freezing of tariff schedules in May was followed by a modification in the tariff policy, observed the work, which indicated that the announcements made by the Ministry of Energy in recent days “imply a higher level of subsidies for residential users of high income and commercial and industrial users. At the same time, there is a significant recomposition in the price of energy, both in electricity and natural gas, paid by middle and low-income users.”
The modification and update of the tariff scheme for network gas and electricity services could have a joint impact on the June CPI of between 0.7 and 0.9 percentage points. «
Chronology
12-18-23: the government decrees the “energy emergency” (DNU 55/2023). It is the legal tool used to apply the rates. With that same DNU, the electricity regulatory entities (ENRE, with jurisdiction in the AMBA) and gas (Enargas, national) intervened.
1-26-24: Public hearing for the electricity rate in the AMBA (areas covered by Edenor and Edesur) in which the government announced increases for all users for generation. On January 29, the hearing was held to adjust the electricity transportation rate. Level 1 subsidies are eliminated.
2-16-24: The new tariff schedules for Edenor and Edesur come into force with increases of between 65% and 150%.
2-28-24: The government imposes more restrictions to access the social rate.
1-4-24: The new electricity values govern in the AMBA.
