By Taos Turner
BUENOS AIRES--Argentina's government will withdraw subsidies
used to keep electricity prices cheap if provincial governors raise
utility rates in their districts, Planning Minister Julio De Vido
said Wednesday.
Mr. De Vido made the comments after local media reported that
Buenos Aires Province Gov. Daniel Scioli has authorized power
distributors in the province to raise rates.
"It's a question of justice or fairness: If we don't cut
electric generation subsidies to the same degree that provinces
raise their rates, we would be discriminating against those
governments that support the social inclusion and competitiveness
policies we're pursuing at the national level," Mr. De Vido said in
a statement.
Mr. De Vido made his comments in response to a decision by
Buenos Aires Province to authorize rate increases of up to 28% for
power distributors, according to the statement.
Mr. De Vido said it was not in the government's interest to
limit the powers of provincial governors to set rates. Instead, he
said, the government is warning them that raising rates would
distance them from the national government's policy priorities.
Spokesmen for the province could not confirm if Mr. Scioli has
decided to raise rates. Meanwhile, officials at distribution
companies said they weren't aware of any formal authorization to
raise prices.
Whatever the case, power distributors in and around the capital
of Buenos Aires are in dire financial shape, thanks to a cocktail
of frozen rates and rapidly rising operating costs.
After years of inflation, which economists say likely totals
around 25% annually, and a decade of capped rates, ailing electric
utilities are on the brink of financial collapse.
Argentina's top power companies are Edenor (EDN, EDN.BA);
Edesur, a unit of Italy's Enel SpA (ENEL.MI); and Edelap.
They distribute electricity to millions of people in Buenos
Aires City and nearby cities.
Unlike distributors in Argentina's interior that have been
allowed to increase rates, the three companies have been largely
unable to raise rates to compensate for inflation and annual wage
increases that often exceed 20%.
In 2011, Edenor, the biggest distributor, reported a loss of
435.4 million pesos ($98.3 million), while Edesur posted a loss of
ARS461 million and Edelap, ARS138 million. Operating costs last
year rose 42% for Edenor, about 45% for Edesur, and 18% for
Edelap.
Shares of the power generation company, Pampa Energia SA (PAM,
PAMP.BA), which owns Edenor, rose 1.7% to ARS1.19.
-Write to Taos Turner at taos.turner@dowjones.com
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