Argentine High Court Lifts Injunction on Electricity Prices

  • Court voted unanimously in favor of government appeal
  • Complaint by social club must be re-evaluated by lower court

The Supreme Court on Tuesday rejected an injunction that blocked electricity providers from raising prices in Buenos Aires province, handing a victory to President Mauricio Macri as he tries to cut back on fiscally expensive subsidies. Electricity companies surged.

The court’s appeals panel unanimously struck down a ruling by a court in Buenos Aires province saying that opposition lawmakers who filed the petition didn’t represent consumers in the province, according to a statement published on the court’s website. Still, the court also ordered the lower court judge to verify whether another plaintiff in the case, a social and sports club, should be considered as representative of similar clubs in the region.

Last month, the Supreme Court upheld an injunction on gas price increases and ordered the government to hold public hearings before it can increase prices. The court may still rule on whether the price increases are legitimate, but Tuesday’s ruling buys the government time for public consultations and establishing a new pricing scheme, said Jimena Blanco, head of Americas at Verisk Maplecroft.

“If the government is reading between the lines, they will review the current plan and they will hold public consultations on electricity even if that’s not what the court openly dictated,” Blanco said by phone from London. “It would be a way for the government to preempt another legal challenge.”

Shares of Pampa Energia SA, Argentina’s biggest electricity company, rose 6.5 percent in trading in Buenos Aires after the ruling was published. Shares of Empresa Distribuidora & Comercializadora Norte, the country’s largest electricity distributor, rose 4.6 percent.

Reducing subsidies on energy bills and public transport is Macri’s main strategy for closing one of the largest fiscal deficits in decades. A colder than normal winter saw prices rise by more than the government anticipated, prompting it to set limits of 500 percent for small- and medium-size companies and 400 percent for domestic consumers.

On Monday, Energy and Mining Minister Juan Jose Aranguren told union leaders that the government was proposing to raise gas prices for domestic consumers at an average of 203 percent at public hearings scheduled for Aug. 16. Senate President Federico Pinedo said on Tuesday the government may also introduce a more gradual price increase scheme for small- and medium-size companies.

Before it's here, it's on the Bloomberg Terminal.