"Last year, the restructuring that had begun in early 2017, defined in the comprehensive tariff reviews (RTI, in Spanish), was completed." In the balance sheets of companies, the wholesale price of energy does not affect, which is passed on to the end user; but what does affect are the distribution margins or regular transport that were discussed at the end of 2016 and revised in 2017 and that were gradually implemented in two years, which would allow companies to have a normal profitability at the end of last year, "explained Santiago Urbiztondo, economist at FIEL.

The company's revenues increased by 36% due to the application of the new tariff schedules effective as of February 1, 2017. At the beginning of last year, the increase in the Distribution Added Value (VAD) began to be recognized in 48 installments that will be distributed until January 21, 2022. In addition, in the adjustment of the August 2018s VAD it was agreed to apply 50% of the increase (7.95%) and the remaining part will be recovered in six installments as of February 2019.

However, Edesur acknowledged that energy sales in 2018 decreased compared to 2017 as a result, among other things, of the context of higher rates and inflation in an environment of economic activity decline.

"We should not expect exorbitant profitability because the increases were huge since 2015 because the starting point was an unrealistic and unsustainable artifice of forcing companies to take losses," Urbiztondo said. According to the economist, achieving a scheme of "normal profitability" of companies, which according to the RTI should be around 14% - today is complicated by the real exchange rate
"The unexpected in the tariff revisions that were defined at the end of 2016 and the beginning of 2017 is that the real exchange rate increased a lot, inflation was 50% and the dollar doubled that rise and in the middle wages increased less than inflation”, said Urbiztondo. "As the energy’s prices generation are in dollars, but not transportation and distribution, the problem cannot be eliminated but it can be limited," he added.

It should be noted that electricity tariffs are adjusted by a formula with several factors (wage index, wholesale price index and the National Consumer Price Index).

"Next year the profitability of the companies should be normalized, as foreseen in the RTI, but it will be complicated for several years because the rules’ deterioration and prices were very great, in a recessive context it will be conflictive", assured the economist. He also recalled that it is expected that from 2020, companies will receive an "overpayment" as a result of the adjustment of tariffs has been made gradually, which will impact around 5% in the final rate.

It is estimated that today 10% of the salary of middle-class families is used to pay for public services and 5% for the highest class. "It's a relevant percentage, before you had 5 points of GDP in subsidies and it went down to 2. Those 3 points of difference are paid via tariffs and users' disposable income is lower", he added.

After the visit of a French diplomatic mission in 2016, Argentina began to bet on the production of electricity through more sustainable means, a clear response to the need for more competitive forms of production. But it is true that there is still a lack of coherence on the part of the government to provide the minimum necessary support.