Invoking the sanitary emergency, the PEN extended the tariff freeze established by the Law of Social Solidarity and Productive Reactivation and extended the restriction to disconnect certain users in the event they do not pay their bills for another six months.
Pursuant to Executive Decree No. 543/2020 (“DNU 543”) the Argentine Executive (the “PEN” after its acronym in Spanish): (i) extended for one hundred eighty (180) consecutive days the tariff freeze established by article 5 of Law of Social Solidarity and Productive Reactivation No. 27,541 and (ii) extended to six (6) the number of unpaid bills which under Executive Decree No. 311/2020 (“DNU 311”) prevent service providers from disconnecting certain users. We include below brief comments addressing these matters.
1. Tariff matters
The Title of Law of Social Solidarity and Productive Reactivation addressing energy matters delegated to the PEN three matters which are closely interrelated: (i) the freeze on electricity and natural gas tariffs; (ii) the renegotiation of such tariffs; and (iii) the administrative intervention of control agencies.
Article 5 of Law of Social Solidarity and Productive Reactivation: (i) established that electricity and natural gas tariffs (including transmission and distribution) subject to federal jurisdiction must not be adjusted for a one hundred and eighty (180) day term as from the Law’s effective date and that Provinces are invited to implement this policy and (ii) delegated to the PEN the power to to renegotiate existing General Tariff Revisions or initiate an extraordinary revision.
The term provided for by the Law of Social Solidarity and Productive Reactivation was about to finish, thus the DNU 543 extended such term for another one hundred and eighty (180) running days. With respect to this extension, in the recitals of DNU 543 it is acknowledged that the sanitary emergency and the mandatory and preventive lockdown prevented the development of tariff renegotiation proceedings. It should be analyzed whether the PEN may extend the term of a legislative delegation determined by the Argentine Congress by means of an executive decree such as DNU 543.
In connection with the administrative intervention of the control agencies, it is worth mentioning that the PEN already executed the legislative delegation granted through the Law of Social Solidarity and Productive Reactivation by means of Decree No. 277/2020 with respect to the Federal Electricity Regulatory Agency (the “ENRE”, after its Spanish acronym) and Decree No. 278/2020 with respect to the Federal Natural Gas Regulatory Agency (the “ENARGAS”, after its Spanish acronym).
2. Disconnection of services
As described in our Newsletter available at https://www.marval.com/publicacion/prohibicion-de-corte-de-servicios-por-falta-de-pago-13584, by means of DNU 311 the PEN prohibited companies that provide electricity, natural gas, water, phone (landline and mobile), internet and cable TV services to disconnect certain users because of lack of payment.
DNU 543 extended from four (4) to six (7) the number of unpaid bills (consecutive or alternate) that would allow the service provider to disconnect the user.
Pursuant to DNU 311 the prohibition to disconnect users with respect to residential users, is limited, among others, to (i) beneficiaries of the Asignación Universal por Hijo (AUH) or Asignación por Embarazo; (ii) beneficiaries of non-contributory pensions with a monthly gross income of up to two (2) minimum wages (Salario Mímino Vital y Móvil); (iii) users within the Social Simplified Tax Regime for Small Taxpayers (Régimen de Monotributo Social); (iv) retirees, pensioners and employees with a monthly gross income of up to two (2) minimum wages; etc.
With respect to non-residential users, the prohibition to disconnect includes: (i) Micro, Small and Medium-sized Enterprises (MiPyMES, after its acronym in Spanish); (ii) work cooperatives and recovered companies; (iii) health institutions; and (iv) welfare nonprofit organizations (entidades de bien público) that contribute to produce and distribute food during the sanitary emergency.
The Ministry of Production implemented DNU 311 through Resolution No. 173/2020, published on April 18, 2020, and established, among other matters, that residential users and monotributistas of categories C and D of such regime, that provide evidence of a reduction of their payment capacity or their monthly invoicing of 50%, may request to be included within the prohibition of disconnection established in DNU 311.
Additionally, Resolution No. 173/2020 appointed a Coordination Unit to prepare a report that will determine the number of users included within DNU 311 as well as the users which should be added. Although such report should have been prepared within fifteen (15) as from the publication of Resolution No. 173/2020, at this date the report is still pending, and the number of users included within DNU 311 continues undetermined.
The prohibition established by DNU 311 is applicable to service providers subject to the jurisdiction of the PEN, but DNU 311 invited the Provinces and the City of Buenos of Aires to join this regulation and most of the Provinces have already joined; thus, the provisions of DNU 311 are currently also applicable to the services of such Provinces.
3. Final remarks
The measures implemented through DNU 543 have a significant impact on many service providers. On the one hand, these measures prevent the adjustment of electricity and natural gas tariffs as well as the execution of the investment programs and; on the other hand, the restrictions to disconnect are generally extended to a yet undetermined number of users, a decision that might encourage users not to pay their bills. It is important, in this context, to thoroughly analyze the effect of these measures and the issues that may arise in connection thereof.
This insight is a brief comment on legal news in Argentina; it does not purport to be an exhaustive analysis or to provide legal advice.