October 23, 2014
Outages keep dividing political waters
For The Herald
Asked by the Herald, political leaders exchange opinions on who is to blame for the blackouts
Buenos Aires City and surrounding areas suffered from blackouts during the last two weeks of December, some of which lasted up to 17 days with City neighbourhoods like Caballito and Mataderos and Greater Buenos Aires districts like Lanús, still with power shortages and associated water scarcity in affected apartment buildings.
In the backdrop, Cabinet Chief Jorge Capitanich attempted to shift the responsibility from national public service providers to the administrations of both Buenos Aires City and the province, while the idea of nationalization re-appeared in the national discourse, leaning on the memory of Néstor Kirchner’s take-back of Aguas Argentinas, the firm that was in charge of water supply in the most important urban area until 2006, from its former owner, private firm Suez Group.
In a press conference held on Friday, Planning Minister Julio De Video did not rule out the possibility to terminate Edesur and Edenor contracts, and he also announced a 24.8 millon pesos fine for both companies in total. De Vido, one the survivors of the first Néstor Kirchner Cabinet, in 2003, accused the enterprises of “negligences and serious breach of concession contract.”
The Herald asked political leaders for their opinions on the current energy crisis.
PRO party whip in the Lower House Federico Pinedo advocated for private energy companies Edesur and Edenor: “It was a joke to expropriate a government-intervened service ten years ago. If somebody wants to solve a problem, what he has to do is to solve it and pay the price.” Pinedo also claimed the electricity system before the 2002 devaluation of the peso was “one of the best in the world,” but the Kirchnerite government “destroyed it” by “taking resources out of the system and thus forcing it into bankruptcy. The main problem Argentina would have in the event it expropriates the (energy) firms is a lack of energy. Billions of dollars are needed, and the state has no money to invest.”
In Pinedo’s opinion, “the service could be managed by the government or private sector — which ever is proven to be a better option — and it could be state-supervised.” He also suggested that the City administration, led by his party’s chief, Buenos Aires City Mayor Mauricio Macri, might consider taking charge of electricity supply in the capital: “Transferring services from the nation to provinces requires an agreement. It all depends on how it is done. If a plausible system is settled upon, the city could manage its own electricity network.”
The leader of the Radical Party (UCR) in the Lower House, Mario Negri, also criticized Kirchnerite officials for their performance in energy policy: “The government showed spasmodic reactions but it does not face up to the background issue. It tries to lay blame instead of solving it (the energy crisis).” Negri also denounced subsidy policies, but refused to make a clear statement about whether the UCR would support a bill aimed at expropriating electricity companies.
For his part, Néstor Pitrola, from the leftist Workers Party, anticipated that his three-memeber bloc would “reject Kirchnerite take-overs because they benefit private firms.” Moreover, the Buenos Aires province lawmakers underlined to the Herald that “public services should be headed by the national government,” because “any transfer to the provinces would cause a further impact on the hip pocket of consumers.”
“We will endorse a bill that demands private companies to release their book keeping, which is controlled by Luz y Fuerza (the labour union for Edenor and Edesur workers),” Pitrola added. The recently-elected lawmaker proposed not to heed to international courts, such as ICSDI, because that court, for example, “favours multinational firms.”
In a radio interview this week, Victory Front lawmaker Juan Cabandié suggested that the national government could take control of electricity services in Greater Buenos Aires. “Private investors are objectively responsible (for blackouts) but they haven’t said a word,” he charged.
From the Senate, Broad Progressive Front Senator Luis Juez asked for a broader plan to avoid arguing about company ownership: “The problem is not whether the service is private or not. In Córdoba (the province Juez represents in the Senate) the firm EPEC is state-owned and we have the same problem. The key is to make a strategic plan, which neither the nation, nor the province or the city have. Córdoba established the value of the the Pilar electric power station at US$1 billion — overpriced by at least 40 percent. The government did have a strategic plan, but it was aimed at looting and corruption.”
“We need a strategic plan for the next 20 years. The argument about whether the service should be state or privately-owned is useless,” Juez added.
Juez — a former prosecutor who first audited the province’s De la Sota administration (1999-2003) — also accused the national government of “giving the provinces back what they had taken only once they proved its uselessness,” referring to Jorge Capitanich’s proposal to transfer management of electicity services to Buenos Aires City and the province of Buenos Aires. Finally, he affirmed that current subsidy policies including those applied on electricity rates are “unfair” because “this so-called national and popular government supports the nouveau riche (residents) of Buenos Aires City with the provinces’ money,” in reference to people who might be able to afford to pay full-fare electricity rates.
Fernando “Pino” Solanas, the newly-elected senator of Buenos Aires City for the UNEN front, told the Herald that “there should be negotiation with the firms, to guarantee investment by improving their revenue with subsidies or fare hikes. As with the transfer of electricity services, all negotiations should take place beforehand. Fares should be increased gradually, twice a year, so that both families and companies can adapt. Subsidized fares for retireees and low-income people should be available.”
Edenor and Edesur were created in 1992 when former president Carlos Menem (1989-1999), a conservative Peronist, decided to privatize the electricity system in Greater Buenos Aires. SEGBA, the state-owned company that was launched in 1958, was divided into several smaller companies. Law 24,065 in January 1992, clearly stated that energy distribution “should be primarily carried out by private legal entities.” Edenor was first sold to Electricité de France, and is now property of Pampa Energía, an Argentine enterprise whose most important stakeholder is Marcelo Midlin, with the Argentine state owning around 27 percent of its shares. The major stakeholder of Edesur is Italian company Distrilec.
In the concession contract, mentioned by De Vido on Friday, terms 35 and 37 established how the agreement can be ended up for breaching it. The shareholders left A-class type shares as security, in case they failed repeatedly with their obligations, or the amount of fines soars up to 20% turnover in the last 12 months. If it happens, the state must bid shares for a public contract. Edesur concession contract was published as Resolution 170 of the Electric Energy Secretariat, in August 31, 1992.