Those who have already received their bill from the Provincial Energy Company ( EPE ), corresponding to the third two-month period of the year, have probably noticed a new increase in the cost of electricity distributed by the state-owned company in Santa Fe.

Why another increase ? Well, essentially because it was already scheduled: at the end of January of this year, the national government announced a 37% increase in the generation stage, to be implemented in two stages, which meant an impact on the final bill of approximately 6% in each stage; consistent with the general plan to reduce energy subsidies , which had so many twists and turns last year, due to the implementation of the reductions without prior compliance with public hearings.

But that's not all. The national government has direct involvement in the electricity generation and transmission stages. In our province, the distribution stage is handled by the Santa Fe-based company. Therefore, the adjustments authorized by the provincial government must be added to the above: a 15% increase in January and 19,1% in March. This makes the provincial electricity bill one of the most expensive in the country.

Subsidy goes out, pocket goes in. Taxes continue, the deficit falls.

But then why do I have to pay more?

One of the cornerstones of the new administration at the Ministry of Finance is compliance with the fiscal targets program announced by the current minister, Nicolás Dujovne. This program established a goal of progressively reducing the primary deficit, setting targets of 4,2% of GDP for the current year, 3,2% for 2018, and 2,2% for 2019.

Regarding the latter, on April 27, the quarterly compliance results were presented, showing that a position of 0,4% of the deficit was achieved against the 0,6% that had been planned for the first three months of the year. Basically, the partial goal was exceeded.

Now, if the current administration has prioritized deficit reduction , which areas were affected? The table below shows a breakdown of primary current expenditures. As can be seen, 60,81% is allocated to Social Benefits, followed by Operating Expenses, which account for 20,58%; the majority of which is dedicated to salaries.

In general terms, the mentioned items have been excluded from potential cuts. The same applies to the delicate situation that the central power maintains with the provinces. All of which results in the reduction in spending being exerted on the so-called economic subsidies.

Thus, the graph below reflects the application of the subsidy reduction policy. The year-on-year decrease between the accumulated amount from February 2015 to the same month in 2016 shows a year-on-year drop of 68,46% for the entire energy sector (including not only current transfers but also capital transfers to companies in the sector).

How is the above reflected on my invoice? The answer is known. The savings that the national state produces in terms of subsidies, with the declared objective of reducing the fiscal deficit, transfers the cost to families or companies, maintaining – approximately and in general terms – the same fiscal pressure.

Of course, this implies an increase in total business costs and greater pressure on household budgets. In this regard, the following graph shows a simulation of different bimonthly fixed consumption levels for a residential consumption plan, category 1201.

To view the complete price list as of April 2017 [ click here ].

As can be seen, from the last two months of 2014 to the second two months of this year, there has been a floor increase of 400% for this type of residential consumption; on which further adjustments are still to be made until 2019. The above will continue to impact mainly households and SMEs, given that large companies have already borne the brunt of the cost during 2016.

But sir, you don't answer the question.

It is true that, up to this point, the argument has outlined the general guidelines for making these adjustments, but not the specific problems of the energy sector . Furthermore, a superficial reading of this article might suggest that the reduction of energy subsidies is simply a way of excluding other sectors. This is entirely incorrect.

In this regard, the Observatory has identified a lack of information that could provide a comprehensive overview . The report attached to this note explains how the electricity market operates and the shortcomings observed in the wholesale market regarding price formation.

The report also details the problems that have arisen regarding supply : its evolution, the different sources of energy generation, and the associated costs that have led to investment problems in the sector and the use of more polluting sources than those currently available. Finally, it shows the evolution of demand at the national level, along with some recommendations for reducing consumption.

The province has recently launched the Home Energy Efficiency Labeling pilot program, which aims to assess the energy efficiency of participating residences and identify potential energy-saving modifications [ click here ].

With the data provided in the report, we hope that the public can have a simple, but at the same time comprehensive, explanation of the phenomenon, which is not subject only to current issues. We hope you enjoy reading it, and that you send us your comments on our social networks. Enjoy it!