• Subsidized electricity cost state $51 billion over 13 years
  • Govt plans to save $4 billion in 2016 by cutting subsidies

Argentina will raise electricity bills by as much as 500 percent in the greater Buenos Aires area as the new government seeks to eliminate a system of subsidies it said cost $51 billion over the past 13 years.

Rates will be divided into seven categories and users who cut consumption will receive discounts while about 900,000 consumers categorized as poor out of 4.2 million consumers will continue to receive assistance, Energy Minister Juan Jose Aranguren said at a news conference in Buenos Aires. As an example of the increase in rates, he said a user who consumes 180 kilowatts of electricity per month will now pay 150 pesos ($10.80), up from 25 pesos ($1.80) previously.

After Argentina posted the worst fiscal deficit in 30 years in 2015, newly-elected President Mauricio Macri is seeking to trim spending this year by reducing subsidies in energy and transport introduced by the previous government. The rise in electricity prices will allow the government to save about $4 billion this year and power companies to invest in a system that’s on the point of collapse, Aranguren said.

“We’re beginning on a path in which we can recover the economic cost of production and reassigning the subsidies the population receives,” he said.

The impact of subsidies on the system has resulted in power cuts that have increased by as much as 125 percent, Aranguren said. The government will ensure that power companies invest in improving production and distribution now that the rates they can charge are more realistic.

The government plans to cut a primary deficit of 5.8 percent of gross domestic product by 1 percentage point this year and reduce it to 0.3 percent by the time Macri’s term ends in 2019.

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