Politics, Business & Culture in the Americas

Argentina Invests in Power Grid After Blackouts

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Argentine government officials formalized a $500 million plan to improve the distribution of electricity in Buenos Aires this week, but remained strongly opposed to raising utility rates in order to alleviate the city’s ongoing energy crisis.

The measure comes after the hottest heat wave on record prompted a series of power outages, leaving hundreds of thousands of Argentines without light and running water in December and January. According to the Argentine Ministry of Infrastructure, Julio De Vido, energy consumption reached unforeseen levels during those two months.

The new government plan will enable two privately-owned electric companies, Edesur and Edenor, to install new substations and upgrade low-voltage cables in neighborhoods affected by the recent blackouts. Edesur and Edenor serve 13 million residents of Buenos Aires and, according to De Vido, will have to increase work crews by 20 percent.

Many, however, accuse the government of sidestepping its own role in the energy crisis. “The outages are synonymous with failure,” said Sergio Massa a likely presidential candidate from the opposition party Frente Renovador (Renewal Front).

After the economic crisis of 2001, the price of electricity in Argentina was frozen to make it easier for consumers to pay utility bills. But in the following decade, revenues remained stagnant as inflation slowly drove up costs. According to the Instituto para el Desarrollo Social Argentino (Argentine Institute for Social Development—IDESA), the cost of generating electricity has multiplied nine times, but the price users pay has multiplied by three, limiting operating potential.

Critics contend that without sufficient investment, utility companies have been unable to modernize the power grid and meet growing demand. Amid the latest heat wave, the country imported large amounts of energy from neighboring Uruguay, which is highly dependent on hydroelectric power.  

In response, the Fernández de Kirchner administration has accused electric companies of failing to use government subsidies to invest in areas under their concession. “What utility companies have to do is take charge, inform and serve their customers and solve the problems of users,” said Chief of the Cabinet Jorge Capitanich in December. He also said that companies “have permanently promoted the idea that they cannot invest because of low rates.”

The government and opposition traded barbs during a tough week for Argentina. As the economy grows faster than the power supply, the country’s current energy policy has proved untenable. Among other factors, huge subsidies administered to private and public companies have significantly contributed to the government´s deepening deficit. In August 2013, the total fiscal deficit reached $58 billion while subsidies to companies totaled $79 billion. On Thursday, foreign reserves, which are used to buy oil abroad,  reached their lowest level since 2006.  

Meanwhile, individuals in the city were taking measures into their own hands as temperatures hovered around 95 degrees. The union of Chinese supermarkets, which estimated a loss of $1.3 million from the outages, filed a case against both the State and energy companies earlier this week. Owners of a neighborhood ice cream store had a generator on hand, in case air conditioning systems overloaded the power grid. And the Casa Rosada was installing a special battery-operated system to ensure that the president’s house would not lose power in the event of a blackout.

Tags: Argentina, Cristina Fernandez de Kirchner, Energy crisis
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