The President of Argentina has declared an "emergency" in the electricity and gas transmission and distribution sectors, citing an increasing obsolescence of the transmission and distribution assets, the insufficient adaptation to the needs of current and future demand, and the deepening inconveniences derived from the lack of renewal of the networks and their expansion. A new decree provides a framework for a review of energy tariffs, in an attempt to guarantee investments in the energy sector, and includes the intervention of the National Electricity Regulatory Entity (ENRE) and the National Gas Regulatory Entity (ENARGAS) as of 1 January 2024 (ENRE and ENARGAS will be able to approve transitory rate increases and periodic price adjustments).
Argentina has some of the lowest electricity prices in Latin America due to subsidies and a freeze on tariffs for around a decade. It is around 5 times cheaper than in Brazil and Chile for industry and around 6 times cheaper for households. In the electricity and gas sectors, the prices charged by private companies are fixed in the concession contracts. According to private estimates, energy and transport subsidies cost US$12bn to the state budget in 2022, keeping gas and electricity bills below 15% of costs and deterring investments in the networks. The announced energy price increase may push inflation in Argentina to nearly 200%.
This decree on the energy sector is part of a series of measures unveiled by the new President, including removing the Price Control Law and regulations preventing the privatisation of public companies (repeal of the State Company Regime). All state-owned entreprises should be transformed into public limited companies, to be subsequently privatised. This would affect the national oil and gas company YPF (Yacimientos Petrolíferos Fiscales, 51% state-owned), which controls almost 40% of the crude oil production (2021). In 2012, the Government seized control of the 51% stake owned by the Spanish energy group Repsol in YPF because of a lack of investment and decreasing hydrocarbon production by YPF. In 2014, Repsol approved a US$5bn settlement as compensation for its 51% stake and sold its 12% remaining stake to Morgan Stanley for approximately US$1.3bn.
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