Energy Sector

With respect to energy matters, the “Law of Social Solidarity and Productive Reactivation within the Public Emergency” No. 27,541 establishes as basis for the legislative delegation (i) the restructuring of the energy tariff scheme following distributive equity and productive sustainability principles and (ii) the reorganization of the energy sector’s regulatory agencies, to guarantee an efficient administration. 

In addition, the Law addresses the following matters:

1. Tariff regulation

• Tariff freeze: 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 Bill’s effective date and Provinces are invited to implement this policy (article 5).
• General renegotiation: The Argentine Executive (the “PEN”, after its Spanish acronym) is entitled to renegotiate tariffs subject to federal jurisdiction, within the framework of the existing General Tariff Revisions or by means of extraordinary revisions, pursuant to Law No. 24,076 with respect to natural gas tariffs and Law No. 24,065 with respect to electricity tariffs, to reduce the burden of these tariffs on homes and companies during 2020 (article 5).  
• Administrative intervention: The PEN is entitled to intervene in the Federal Electricity Regulatory Agency (the “ENRE”, after its Spanish acronym) and the Federal Natural Gas Regulatory Agency (the “ENARGAS”, after its Spanish acronym) for a one (1) year term (article 6).
• ENRE’s jurisdiction over Edenor and Edesur: During the term of the emergency declaration (i.e. until 12/31/2020) ENRE must continue to have jurisdiction over the distribution services provided by Edenor and Edesur as utilities. Additionally, the Bill suspends the second paragraph of section 124 of Law No. 27,467, pursuant to which once the transfer to the City of Buenos Aires and the Province of Buenos Aires of such utilities is completed, ENRE must retain its jurisdiction except in connection with matters related with the distribution services provided by Edenor and Edesur as utilities (article 7).

2. Hydrocarbons Exports

Export duties: The Law includes a cap of eight per cent (8%) on export duties applicable to hydrocarbons and establishes that export duties will not reduce the wellhead’s value for the purposes of calculation and payment of royalties to the Provinces. The latter was vetoed by the PEN.

Taking into consideration prior experience of regulations issued within the framework of emergency declarations, the broadness of the delegation of powers, and the lack of parameters with respect to tariff revisions, it is imperative to follow the measures being taken by the PEN closely.