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Government aims to begin removing subsidies from middle and low sectors in March

The Government aims to begin the removal and reformulation of subsidies on gas and electricity rates for households in the medium and low segments in March. Official sources told Ámbito that they estimate that this will be possible after the call for the public hearing on February 29 is made official.

This Wednesday, the Ministry of Energy published in the Official Gazette the call for said public audience through Resolution 8/2024. There, the system of “basic energy basket” with which it will seek to replace the current segmentation scheme among high, middle and low income households implemented last year.

The Ministry of Economy seeks to accelerate the pace of adjustment of subsidies. Days ago, it implemented an increase in the seasonal price of electrical energy for businesses, industries, and public entities (with impacts that in some cases are between 200% and 400%, according to estimates by specialist Julián Rojo), but in the case of Residential users only applied it to those in level 1 (high income).

Originally, it was planned to apply it to the three segments, however, it was decided to postpone the increase in middle and low-income households until the new basic energy basket is approved for avoid prosecution to stop the process of removing subsidies for not complying with the increase limits established in the regulations that established the current segmentation. The memory of the CEPIS ruling of 2016 that hindered the plans of Mauricio Macri and Juan José Aranguren activated caution in the Executive.

In January, the Secretary of Energy, Eduardo Rodríguez Chirillo, had said that the public hearing to approve the scheme that will replace the segmentation of subsidies would be held in March and that it would come into force in April, but now they are seeking to accelerate the process so as not to delay the adjustment. The fact is that, precisely, the replacement of the current subsidy segmentation scheme with the basic energy basket scheme is what they consider will allow us to overcome possible complications in Justice.

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Fees: the public hearing

The resolution published today defined the agenda of the public hearing. On the one hand, the redetermination of the structure of subsidies for electricity and gas, including the consideration of subsidies intended for those users who do not have a connection to the natural gas network (Homes with Garrafa Program). On the other hand, the redefinition of its incidence on the seasonal price (PEST) in the Wholesale Electricity Market (MEM), the price of gas at the Point of Entry to the Transportation System (PIST) and the price of propane gas indiluted by networks.

The audience will have virtual mode, by videoconference. It will begin at 10:00 a.m. on February 29. Only those who want to participate as “speakers” will require registration. For the rest, the speeches will be transmitted via streaming on the channel of the Ministry of Energy.

Registration will be open between February 7 and 27 through the Energy website. And the Treasury Palace will make available the consultation materials prior to the speeches starting on February 15, including the Technical Report of the Secretariat that will be presented at the hearing.

Subsidies: the new scheme to limit them

In principle, within the framework of adjustment plan towards financial balance, the Government’s idea is reduce energy and transportation subsidies by 0.7% of GDP this year, of which 0.5 points correspond to light and gas. To this end, it is proposed to leave segmentation by family income behind and move to a more limited scheme that establishes a basic energy basket with essential volumes of gas and electricity consumption by bioclimatic zone that will remain subsidized. Volume exceeding that basket will pay the full rate.

The overlap of these subsidies with beneficiaries of social plans, most of whom were categorized as Level 2 (low income), will also be reviewed.

However, the change in scheme will imply the beginning of a sharp rate increase for low- and middle-income households. The magnitude will depend on the fine print of the new basic energy basket. Weeks ago, the consulting firm Economía y Energía had estimated that between the removal of subsidies and the increase in the tariff components that correspond to the remuneration for the service provided by distribution and transport companies, gas bills could rise up to 697% for users. from the low level and up to 666% for those with middle income towards the end of the process.

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