Argentina Considers Takeover Of Struggling Power Suppliers

The government here said Thursday it is considering a takeover of two of the country's biggest power distributors under state control after outages sparked protests during a heat wave.



"It is a question that is in the process of analysis and discussion," Cabinet chief Jorge Capitanich said during a televised press conference.



He said a decision could be made sometime between this month and next.



The threat comes as blackouts during a heat wave affected large parts of the Greater Buenos Aires area, the country's largest metropolis with a population of approximately 13.5 million.



Temperatures rose as high as 105.4 Fahrenheit (40.8 Celsius) this week, leading to a surge in demand for air conditioning that has overloaded the system.



The lack of electricity has raised the ire of residents during the southern hemisphere's summer, with protests held in front of government buildings and the offices of the two privately owned distributors, Edenor and Edesur.



Lula Bertoldi, the pregnant lead singer and guitarist of the rock band Eruka Sativa, was so fed up after a week of outages and no satisfactory response to her complaints from Edesur that she protested at the company's offices.



In a video she posted Wednesday on Facebook, Bertoldi can be seen throwing out rotting food from her refrigerator onto Edesur's floors.



In response to the tension, Edesur, which is controlled by Italy's Enel, said in a statement Wednesday that its "business is not viable," citing as a leading reason that tariffs are too low.



The government has kept a tight lid on tariffs for public services since a 2002 economic crisis, allowing them to rise only marginally, according to the private companies.



This has led many to rein in spending, making it harder to keep pace with demand as the economy rebounded between 2003 and 2011 before slowing and then falling into recession in 2014.



Edesur, which supplies 6.1 million customers, said that with a freeze on its tariffs since 2008, it has not been able to keep up with a surge in costs over the past year as inflation picked up pace to nearly 40 percent from 28 percent in 2013.



Indeed, Edesur said it lost $157 million (1.4 billion pesos) in 2014 compared with a profit of 1.16 billion pesos in 2013 as its operating costs surged by between 20 percent and 47 percent for everything from salaries to purchasing power and hiring services.



Edesur added that it invested 2.1 billion pesos in 2014 to keep capacity in line with demand, 95 percent more than in 2013.



That, however, was not enough, as witnessed by the blackouts, said Gustavo Calleja, an energy analyst at the Arturo Illia Foundation, a think-tank.



He agrees tariffs are too low and not keeping pace with inflation, but said power distributors should still invest sufficiently to meet rising demand or else allow the business to come under state control like before the 1990s.



"You have to invest and then get higher tariffs, not demand higher tariffs in order to invest," he said.



Calleja said he is not opposed to another nationalization of the power distributors, adding that there would be popular support given the blackouts and the state takeovers of a major oil company, a water distributor and the national airline over the past decade after those businesses faltered.



"What people want is electricity, nothing else," he said.



www.aa.com.tr/en - Arjantin