The recently elected Administration has declared the energy sector emergency. The measure was adopted by emergency decree No. 55/2023 (“Decree 55”).
Additionally, Decree 55 orders the gas and electricity regulatory bodies to undertake an integral rate review, in turn authorizing temporary rate hikes.
Further, Decree 55 entrusts the Secretary of Energy (“Secretary of Energy”) to establish a comprehensive governmental program with respect to power generation, transmission and distribution, and gas production, transportation and distribution, with the end-goal of establishing a pricing criteria based on market conditions and free access rules, while maintaining revenue levels in real terms and covering investment needs.
Finally, regulatory bodies ENARGAS and ENRE are intervened while their directors are appointed through a public contest.
Key aspects of Decree 55 are as follows:
I. Considerations of Decree 55
Decree 55 seeks to adopt urgent measures in view of the high risk of natural gas and electricity energy shortage to users all around the country, while assuring a better and more efficient service.
In a general way, Decree 55 also recognizes that gas and electricity public utilities associated infrastructure is becoming obsolete, namely because the lack of grid expansion programs.
It also added that power transmission lacks capacity, leading to curtailment. Moreover, it recognizes that the pricing criteria and current remuneration schemes do not have the adequate signs for new investment, nor promote a market-term among the industry participants.
With respect to natural gas transportation infrastructure, it is noted that local production of natural gas in northern Argentina and the availability of the resource imported from Bolivia have decreased, thus leading to potential shortages. Therefore, the need for the reversion of the Northern Gas Pipeline is highlighted, to guarantee gas supply on that area, which is critical to lithium and other industries too.
II. Relevant provisions of Decree 55
- Powers of the Secretary of Energy: The Secretary of Energy is empowered with elaborating an overall program with respect to the activities mentioned before, with the objective of establishing a rate and pricing criteria under conditions of competition and free access, maintaining in real terms the levels of income, covering investment needs, and guaranteeing a secure and continuous public utilities.
- Rate adjustment and temporary increases: Gas and power regulators ENRE and ENARGAS must start revising gas and electricity rates, and by December 31, 2024, a new rate scheme should be in place. Temporary increases are permitted.
- Intervention of ENRE and ENARGAS: The ENRE and ENARGAS are intervened until their vocals are appointed. Broad powers are given to the intervenors, who will be appointed by the Secretary of Energy.
For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, Pablo Arrascaeta, Milagros Piñeiro, Florencia Martínez, Rocío Valdez and/or Victoria Barrueco.