1. THE ARGENTINE REGULATORY FRAMEWORK VIS-À-VIS THE CURRENT POLITICAL CRISIS AND ITS SOCIOECONOMIC CONSEQUENCES

2. Description of the regulatory framework
The context in the ´80s
Poor quality service
Low internal efficiency
High unavailability of the installations
High level of losses particularly due to the stealing of electricity power
Poor client satisfaction
Cross subsidized; political tariffs; no generation of resources for network expansion
Unclear signs for the economy

3. Description of the regulatory framework
The context in the ´90s
The new regulation permitted to:
Stimulate competitiveness wherever possible by encouraging the private investments
Separation of the industry segments, whether monopoly ones or those subject to the market laws
Guarantee free access to Transmission and Distribution
Regulate Transmission and Distribution with fair and reasonable tariffs with appropriate rate methodologies.

4. Description of the regulatory framework
The context in the ´90s
Achievements:
Private investment was attracted (more than 9 billion US dollars in ten years)
Significant increase in the supply (From 13.2 GW in 1992 to 20,7GW in 2000)
Substantial upgrade in quality of service (From 13.6 cut/client-year in 1922 to 4.6 cut/client-year in 2000)
Sharp decrease in power and energy prices (From 48,7 U$/MWh in 1992 to 27,6 U$/MWh in 2000)

5. Description of the regulatory framework
The context in the ´90s
Main issues to tackle:
Decrease of investment in Generation
Transmission quality were not coherent with those required by the Distribution Companies.
Keep the legal certainty in Distribution

6. A new game rules Effects on public service utilities companies
“Pesofication” of tariffs originally expressed in US dollars
Barring from modification or indexation of tariffs
Announcement of a renegotiation process, unfulfilled to this date

7. A new ball game Consequences:
Legal certainty and property rights were violated
The regulatory framework was altered
The electricity industry became the subsidizer of all the sectors in the demand
Most companies will be forced into financial default
The sector is unable to renegotiate debts in US dollars, as it cannot schedule reformulation of contracts, tariffs or revenue

8. Proposals to overcome the crisis
Emergency stage: Immediate increase of tariffs
Re-adjustment stage: Define a reference rate and a pathway to attain it. Determination of the “Regulatory Asset”
Recovery stage: Additional tariff increases over the reference rate to recover financed regulatory assets

9. Proposals to overcome the crisis
$/kWh
Time
Regulatory Assets
Recovery of
Regulatory Asset
Pathway to
reformulation
of tariff
Reference rate
Inv.
Miant.
Debta
Rent.
Maintenance
Investment
Profitability
Power (pass through)
Debt
Current
Tariff
Tax
Reduction of taxes
Tax
Power

10. The current context
Two presidential candidates will compete in a runoff on May 18, 2003
With slight differences, both their proposals involve:
i) Upholding legal certainty, within the new framework;
ii) Emergency tariff hike, sparing needy households;
iii) Renegotiating contracts and setting up a background tariff within a term of 12/18 months;
iv) Defining a tariff pathway;
v) Clean slate for losses incurred in by companies between January 2002 and the end of renegotiation.