The reforms of 1991/92 Prior to 1991, the electricity sector in Argentina was vertically integrated. The sector experienced a serious crisis in the summers of 1988/1989, primarily due to the lack of maintenance of the country's thermal power plants (50% were unavailable). Shortly after the crisis, the government of
Carlos Menem introduced a new legal framework for the electricity sector through Law 24,065, which included the following elements: vertical and horizontal unbundling of
generation,
transmission and
distribution; opening up of all segments to the private sector; and separation of the regulatory function from policy setting. As a result of the new law, there was substantial private investment which, together with the public power plants that started production in the 1990s, transformed a situation of power shortage and low quality into one of abundance and reliability at lower prices. ENRE (Electricity National Regulatory Entity) was created in 1992. The Wholesale
Electricity Market (MEM), which covers up to 93% of total demand corresponding to the Argentine Interconnected System (SADI), was also created in 1992. The remaining 7% share of the demand corresponds to
Patagonia, which had its own interconnected market, the Patagonian Wholesale Electricity Market MEMSP), now interconnected with the MEM. CAMMESA (Wholesale Electricity Market Administration Company) was also created that year and assigned the responsibilities of coordinating dispatch operations, setting wholesale prices and administrating economic transactions performed through the Argentine Interconnected System.
Tariff freeze As a response to the 2001
economic crisis, electricity tariffs were converted to the
Argentine peso and frozen in January 2002 through the Public Emergency and Exchange Regime Law. Together with high
inflation (see
Economy of Argentina) and the devaluation of the peso, many companies in the sector had to deal with high levels of debt in foreign currency under a scenario in which their revenues remained stable while their costs increased. This situation has led to severe underinvestment and unavailability to keep up with an increasing demand, factors that contributed to the 2003-2004
energy crisis.
Creation of Enarsa In 2004,
President Néstor Kirchner created
Energía Argentina Sociedad Anónima (
Enarsa), a company managed by the national state of
Argentina for the exploitation and commercialization of
petroleum and
natural gas, but also the generation, transmission and trade of electricity. Through the creation of Enarsa, the state will regain a relevant place in the energy
market that was largely
privatized during the 1990s.
Energy Plus and Gas Plus programs In September 2006, SENER launched the Energy Plus (
Energía Plus) program with the objective of increasing generation capacity and meeting the rising demand for electricity. The program applies for consumption levels above those for 2005. CAMMESA requires all large users (above 300 kW) to contract the difference between their current demand and their demand in the year 2005 in the Energy Plus market. In this new de-regulated market, only energy produced from new generation plants will be traded. The aim of the program is twofold. In one hand, it seeks to guarantee supply to residential consumers, public entities, and small and medium enterprises. On the other hand, it aims at encouraging self-generation by the industrial sector and electricity
cogeneration.
The National Program for the Rational and Efficient Use of Energy (PRONUREE) In December 2007, the government launched the National Program for the Rational and Efficient Use of Energy (PRONUREE, Decree 140/2007). This decree declared the rational and efficient use of energy to be in the national interest and is also part of the energy sector strategy to counter supply/demand imbalance. The PRONUREE, under the responsibility of the Secretariat of Energy, aims to be a vehicle for improving energy efficiency in the energy-consuming sectors and acknowledges that energy efficiency needs to be promoted with a long-term commitment and vision. It also acknowledges the connection between energy efficiency and sustainable development, including the reduction of greenhouse gas emissions. The program also recognizes the need for individual behavioral changes to be promoted with an educational strategy, with the public sector setting the example by assuming a leadership role in the implementation of energy conservation measures in its facilities. The PRONUREE includes short- and long-term measures aimed at improving the energy efficiency in the industrial, commercial, transport, residential and service sectors and public buildings. It also supports educational programs on energy efficiency, enhanced regulations to expand cogeneration activities; labeling of equipment and appliances that use energy; improvements to the energy efficiency regulations; and broader utilization of the Clean Development Mechanism (
CDM) to support the development of energy efficiency projects. One of the first activities defined under PRONUREE is the national program to
phase out incandescent bulbs by 2011 in Argentina. The program, financed by the government, aims to replace incandescent bulbs with energy efficient
compact fluorescent lamps (CFLs) in all households connected to the electricity grid and selected public buildings. The program, which has initially undergone a pilot phase and expects to replace 5 million incandescent lamps in the next six months, foresees the distribution of 25 million lamps overall. Staff from the distribution companies will visit each household to replace the incandescent lamps and to inform residential users on the advantages of replacing the bulbs and of the efficient use of energy in general. to a 17.4% additional charge to residential customers. Likewise, Santa Fé approved increases between 10% and 20%; Mendoza between 0 and 5% below 300 kWh and between 10% and 27% above 300 kWh; Jujuy between 22% and 29% and Tucumán between 10% and 24%. Other provinces (i.e. San Juan, Chaco, Formosa, Corrientes, La Pampa, Neuqen, Río Negro and Entre Ríos) are expected to raise tariffs in the near future. Recently, in August 2008, after a 7-year tariff freeze, residential electricity tariffs in the Buenos Aires metropolitan area (served by the Edenor, Edesur and Edelap utilities) have been increased by 10-30% for households that consume more than 650 kWh every two months. For consumption between 651 kWh and 800 kWh, the increase will be 10%; on the other end, for users over 1,201 kWh, the increase amounts to 30%. The increase impacts around 24% of all Edenor, Edesur and Edelap customers (1,600,000 households). For commercial and industrial users the increase will be 10%. At the end of August 2008, ENRE also approved increases in
transmission tariffs in the 17%-47% range. The increase granted by ENRE was below the increase determined by the Energy Secretariat for some transmission companies (e.g. Transener, Transba, Distrocuyo and Transnoa. Some of them (i.e. Transener, Transba), will most likely challenge ENRE's decision. An overall tariff revision is still pending and has been put off until February 2009. ==Tariffs, cost recovery and subsidies==