Argentina subsidizes 65% of power consumption, minister says

Citing that the Argentine government currently subsidizes 65% of the country's electricity consumption, energy minister Juan José Aranguren defended recent consumer electricity and natural gas tariff increases before the senate.

"The objective of the tariff adjustment is not to reduce the fiscal deficit by eliminating subsidies, but rather [to ensure] that there is energy in the country," state news service Télam quoted Aranguren as saying.

Legislators and provincial governors from throughout the country have criticized Aranguren, a former longtime Shell executive and appointee of center-right president Mauricio Macri, for authorizing the rate hikes.

While experts have long cited the un-freezing of utility rates as necessary to restore investment and shore up infrastructure in the energy sector, critics – particularly in Patagonia, where residents depend on gas to stay warm during the winter – have said the suddenness and severity of the tariff surge placed an unfair burden on households.

The electricity and gas rate measures were approved in February and April, respectively.

Discontent over the subsidy cuts has led to protests, work stoppages and judicial orders in multiple provinces blocking both the power and gas rate increases.

Amid growing unrest and reports that gas rates had shot up 2,000% in some cases, Aranguren partially relented, placing a cap on both the increases.

Nonetheless, Aranguren told senators: "If we maintained the previous [tariff] scheme, gas and power cuts were going to become more frequent and the service was going to continue deteriorating."

Since Macri took office in December, Argentina has been forced to import electricity from neighboring countries and implement natural gas rationing measures, in order to ensure supply of both commodities to households during periods of high demand.

Aranguren said that Argentina relies on imports to meet 13% of its energy needs, despite being "rich in resources."

The minister added that the government plans to implement an energy efficiency incentive program, under which end-users who reduce their year-on-year monthly consumption of gas or power by 15% or more will receive a discounted rate.