Monday , June 14 2021

Rates 2019: What will happen with electricity increases over the next year



During this year, increases in electricity service for users were 18% in January and 24.4% in August, on average, to the city of Buenos Aires and the metropolitan area, where Edenor and Edesur provide services. This represents a cumulative increase 46.3%, What can be expected for next year? The next readjustment, meanwhile, will be in February. For experts, although electricity rates are still behind, the electoral context can dampen the increases at least in the first part of the year.

According to the Consumer Price Index of the city of Buenos Aires and a survey conducted by Invenómica, From December 2015 to October 2018, increases in electricity service were, on average, 1317%. Nominal wages increased by around 98% over the same period.

"In 2019, considering the cut in subsidies for services stipulated in the budget, Certainly the increases will be above general inflation. As a floor, an increase of about 35% in electricity is expected, "he said. Horacio Larghi, an economist at Invenómica.

"With an electricity tariff, it is rather late, and in the electoral context, it is difficult to estimate what the government's movement will be, especially due to time issues. It is likely to apply a significant increase after the election, for example, and not before", he emphasized Nicolás Crespoof Elypsis.

Another very important factor will be exchange rate volatility. "Although the exchange rate seems to show some stability, the band above December 31 will be set at around $ 48, which gives room for internal or external shocks that pressure the currency end up impacting costs again"He also warned that political risk can greatly alter markets, generating uncertainty in the exchange rate and, consequently, in the subsidy account.

This first increase next year will include part of the increase in August last year (which was decided to split into two sections). And also the accumulated inflation between September and January, based on the index of wholesale prices (WPI) measured by Indec. The price reflected in the final invoice received by the user has three components: the Value Added Distribution (DVA), which are received by Edenor and Edesur distribution companies, transport (which has less impact on the final value) and the generation of energy.

From the government, they ensure that subsidies for electricity will be reduced from 33% (for November 2018) to 21% in 2019 and later to 14% in December next year. They estimate that an average user paid 10% of the electricity value in November 2015. By 2018 the percentage is already 76% and the average by the end of 2019 will be 86%. The expectation is that by 2020, energy tariffs have no more subsidies.


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