May 17, 2022 4:31 am

After the cuts, Edesur’s number one speaks: “We cannot continue with a model of improvised rates and without clear rules”

The last days of high temperatures exposed the fragility of the electrical system in Argentina after the massive power outages that occurred during the heat wave. The sector is characterized by instability in the regulatory framework, with almost frozen rates and lack of investment. In specific data: in the last 20 years, in 18 the economic emergency law was in force and, in 17, the National Electricity Regulatory Entity (ENRE) was intervened.

In this context, the Italian company Enel, the controlling shareholder of Edesur, asked to end the “improvised rate model, without clear rules”. The distributor presented a balance in red, as of last September, of $12,500 million.

“The company has not distributed dividends for 20 years, except for 2009, when $30 million was distributed. In the last year, we invested close to US$160 million based on debt. We borrowed from the shareholder, who put up US$100 million, and Cammesa [la compañía con control estatal encargada del despacho de energía eléctrica]. Continuing to support a debt-based company is not sustainable, so it is important that the situation is regularized”, says the Brazilian Claudio Cunha, country manager of Enel Argentina for five years.

—Why is the system not prepared to withstand heat spikes?

—Because we need to rearm a system that is more robust, transparent and stable over time. We cannot continue with a model of improvised rates, without clear and stable rules. It is necessary to have a minimum of visibility, which allows planning in the medium and long term. As we saw this week, it is not an issue of Edesur or Edenor: it is of the system, of generation, of transportation and not only in Greater Buenos Aires, but also in the interior. It is very important that it be something shared with the State, hopefully with the opposition as well, it is not something that changes with the political party in power. It has to be a state policy, as happens in countries where the electricity system operates reasonably well.

—The criticism they make of the distributors is that they were given significant rate increases during the government of Mauricio Macri and the system did not improve. Is it so?

—The service improved and we see it in the data. The duration of the cuts are half of what they were before. In 2015, Edesur had an average cutoff time of 33 hours per client per year and today it is 13 hours. You have to keep improving and for that you need time, investment and peace of mind. All the municipalities and neighborhoods of Buenos Aires have improved. In Capital we have communes with one-digit indicators, which are a good level of service, as other Latin American countries have. When we look at municipalities like Lomas, Quilmes, Florencia Varela and Avellaneda, to name a few, they have improved 60% on average. That is audited by the ENRE. Edesur is the company that invested the most in the last three years, more than any other distributor in the country. If we look at the period of the pandemic, we improve Saidi by 35% [índice de duración promedio de interrupción del sistema] and commercial claims, 65%. We are clearly not happy and comfortable with the service being provided. It is missing, that is why I say that we still have to continue investing and for that it is necessary to have more stable rules.

—When we talk about criticism of the company, it is not only from the users but also from the Government. That was very strong last year, especially from some mayors. Why do you think there is so much criticism from them?

—The electrical issue has been politicized in recent years. We operate in more than 30 countries and have 75 million customers. In Edesur Argentina we have 2.5 million. We administer and manage the company for the country, for society and for our clients, not for governments. We have a 90-year concession and we are not going to get into political issues because it is not our role; ours is to improve the quality of service, something we have been doing and we have shown it with data and facts. Even in the municipality where the criticism is made [Lomas de Zamora, donde gobierna Martín Insaurralde] the quality of service has improved by 45% in recent years

—Do you think there is the same level of criticism on the part of the Government with Edenor? For example, the ENRE appointed a watchdog at Edesur for the year-end power outages, but did not do the same with Edenor.

—We understand that we are a regulated company and that the ENRE has to do its job, regulating, managing and asking questions. We see it naturally the entrance of the veedora. We give you the information you need to do your job. We have always done it with transparency, as it should be in a regulated sector like this. Transparency on both sides and continue working with common goals to improve the quality of service.

—The Government announced a 20% increase in rates, how much of that increase will go to distribution? Will there be a public hearing?

—No, we have no formal information about it. We know what was circulating in the media. With this crisis, it is a great opportunity for us to build a new transition rate plan for the next two years, doing it together. I don’t see a better opportunity than this to spend the next summers in a more relaxed way. Beyond the summer, we know that we are entering a decade of electrification.

—The Government designed a sustainable mobility project, which proposes that, as of 2041, all vehicles manufactured in Argentina must be electric. Is the system ready for that?

—If when we have an upturn in economic growth, we have to reduce consumption during peak hours in industries, it means that the system is not prepared for growth of this nature. From Edesur we had already been calling our clients before the government measures to reduce the level of consumption. We have managed to reduce more than 40 MW in this way and, as a distributor, we added 80 MW of generation. We support the Government’s initiative, but we need to have something sustainable over time to support this greater electrification.

—What is known about tariff segmentation? Did the government give you anything in advance?

-No. We know what circulated in the media, we do not have more information.

—Is it feasible to segment the rates based on the value of the property?

—The information is available. If they are able to cross it because they have access to different data, it can be done. We’ve been talking about this for two years now and we still haven’t done it. There are different types of segmentation: geographically, by consumption or by personal income. It is not a complex subject. Whatever the model, it will have imperfections that have to be managed when they are implemented.

—Why do you think the government has not yet implemented it?

“A good question, I couldn’t tell you.”

– There is talk that the Government would delay the increase in rates given the context of this week. What implications would this have?

“We keep dragging out a problem. Here we need to act and do it quickly. Last year we made an agreement with the President, where we promised to invest $2.5 billion. We have even done it ahead of schedule. When agreements are made, our part executes them in a timely manner, but we have to move forward in closing the agreements that we have open.

-How much is the debt you have with Cammesa and how is it regularized given the rate delay?

-The solution is in the law of Past Preposition, which was extended this year, in article 87; it just has to be implemented. The debt is $43.7 billion.

—How is the relationship with the undersecretary of Electric Power, Federico Basualdo?

We have frequent and fluid contact. The issue is that we were unable to advance on the solutions that were being negotiated. It is not a matter of lack of contact, but of a political decision that has to be made and of the convergence of the political world to try to find a shared and sustained solution.

-What is the arrears in fees? The last increase for distribution was 26% in April, which was reflected in a final 9% for users.

—More than 100% is the delay due to inflation in the last three years. The previous increase had been in March 2019.

—Despite this context, why does Enel continue betting on Argentina?

—We see Argentina with a huge potential. Enel is present in all the big cities of Latin America and Buenos Aires is the second most important. How can we not have a presence in a place like this? There is a huge potential for gas, but also, and more importantly, for renewable energy. We have a monstrous potential consumer market with the population that there is. Argentina has always been leading the electricity sector. It is a question of political will and whether we want to confront the problems.

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