Argentina Increases Electricity Prices Paid to Power Generators

Argentina granted higher electricity rates to power generators dropping legal actions against the country as President Cristina Fernandez de Kirchner seeks to stem a widening budget deficit propelled by energy imports.

Rates will increase between 25 percent and 110 percent for some generators, according to a resolution in today’s official gazette. Rates will increase the most for companies using biodiesel to generate electricity, according to the resolution.

Fernandez is reducing water and natural gas subsidies this year after a record $6.1 billion energy deficit in 2013 following 20 years of surpluses. Bi-national generators such as those operated jointly by Argentina and Uruguay are excluded from any rate increase, according to the resolution.

“It is necessary to update the tariffs to ensure energy supply,” according to the resolution. “The goal is to ensure the economic development of the country.”

Argentina, South America’s second-biggest economy, has been blocked from international credit markets since its 2001 default on $95 billion of bonds. Fernandez cut water and gas subsidies by an average 20 percent on March 27 in a bid to narrow the largest fiscal deficit in more than a decade.

Generators that have dropped legal and administrative claims against Argentina for banning rate increases will be able to collect the higher rates retroactively from February. Other generators who agree to drop claims will be able to apply the new rates for one prior month to their agreeing to abandon claims.

Power generators in Argentina include Pampa Energia SA, Endesa Costanera SA, Central Puerto SA and Hidrolectrica Piedra del Aguila SA.

The resolution doesn’t say whether electricity distributors will be allowed to pass on price increases to customers.

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