The Government declares that gas and electricity will increase at the rate of inflation: between 25 and 30%

Concerned about the progress of the


inflation
and, at the same time, compliance with the budgetary objectives agreed with the


IMF
the government promised that


rate of gas and electricity
will only increase by about 25% and 30%, respectively, as from the next October review. The Minister of Energy,


Javier Iguacel
noted that although "there are still adjustments to be made", these will follow inflation.

Meanwhile, the ministry is conducting a time trial with gas companies and energy producers. On the one hand, the government must reduce spending on subsidies, which increased 74.6% in June due to the devaluation (it also includes transport rates). But, on the other hand, this higher cost is almost impossible to absorb for individuals and SMEs, in addition to having a total impact on inflation, which accumulated in June an interannual variation 29.5%. What remains for the government, then, is to spread the cost of the devaluation with the companies in the longer term.

"The price of gas will not increase by more than 25%," Iguacel said in the program.
I must say Luis Novaresio. He added that electricity would increase by less than 30%.

Now, the price of gas at the wellhead, which now costs about $ 4.68 per million BTU (English measure used in the sector), in October, it should rise to $ 5.26, depending on the trajectory of subsidy reduction that was to end in December 2019 and was published in Resolution 212 of the Official Journal on October 7, 2016. [19659008"WearenowatUS$468nowwiththecurrentpriceof$28weareUS$4below"explainstheindustry'scostThepricesystemwascalculatedwitha$2020retailpriceperyearThisisbecausethegovernmentisnegotiatingtoendanewauctionsystemasIhavebeenadvancingbecauseofthepricethathasbeensetbytheexchangeofbillsandthevaluationcannotberespectedbecausethereisnomarkonit

THE NATION . The times are pressing, as the next gas price increase at the wellhead should be in October. However, according to sources close to the subject, the call for bids would take place in April. The companies, in exchange for completing the prescribed lane, would be able to sign a contract for a longer period if they win the bidding call in April. "It's him
exchange to cancel the price increase that ended in 2019 and took the price of imported gas. They would change the security of a price scale regulated by security that gives a long-term contract, "commented the industry.

The discussion would therefore be between private: between the distributors who buy the gas and the producers who sell it, and the government hopes that with the greatest abundance of gas that Argentina is starting to have, the price of the auction will be lower than what it would be if the current system was continuing. "We bet that next winter [the factura of gas] be in pesos similar to this year," said the night before Iguacel.

With electricity tariffs, the system would be similar: "For producers today, the gas costs them $ 5.20. The idea is that they go to a tender with producers, as well as distributors, and that this lower price certificate will offset part of the exchange rate update for that wholesale electricity subsidies increase little.

In parallel, the government must negotiate, which absorbs the devaluation, which costs more than the 25% promised by the minister. The price of gas at the wellhead, which is currently US $ 4.68, has risen from $ 94, 54, with one dollar to $ 20.20, to $ 131.04, with the currency at $ 28, that is, the price in pesos rose by 38.6%.

On average, 50% of the weight of the bill is the value of the gas, nearly 15% is the distribution, 10% is the transport and the rest are taxes (21% for the VAT and the rest for the gross income and other provincial or municipal taxes). Therefore, any changes are made in the price of the impact of the wellheads directly on the final rate.

Of the other components of the gas bill, in transport and distribution, which is a regulated sector through the intermediary of Enargas, the tariff adjustments have already been approved and have been put implemented in three staggered steps. The last was in April of this year. This industry, therefore, until April 2022 will no longer have any adjustment, since the investment plans are five years old. The only thing that changes every six months is the cost movements, which depend on the wholesale price index (IPIM), although it is not an automatic update, it depends on the decision of the regulator. On this, the government said the adjustments would be for inflation.

Meanwhile, in the latest national accounts report, spending on economic subsidies (money allocated to electricity, gas and transmission rates), Although, during the semester , they grew 8.2%, less than the inflation of one year on the other, in June, they had an increase of 74.6%. The question is not minor when the government is trying to reach a budget deficit of 2.7% of GDP this year and 1.3% the following year.

Constant tugging

• Price System: Currently, the price of gas at the wellhead is about US $ 4.68 per million BTU, and in October it is expected to increase to US $ 5.26 .
• The government wants to suspend the system and switch to an auction system between producers and distributors, which will be done next April.
• Devaluation: On the other hand, the government negotiates that absorbs the cost of devaluation, so that rates increase by 25% as promised