Argentina’s Power Companies to Compensate Consumers for Outage

Argentina’s government has filed a lawsuit against its power companies after a major power outage left approximately 850,000 users in Buenos Aires in the dark.
Published: Wed 14 Nov 2012

What happened  

Argentina’s power distribution companies are being slapped with fines for the recent major electricity outage which affected most of the country’s capital. Power distributors Edenor and Edesur are being told to pay almost US$33m in fines and compensation to customers.

Background          

The outage, which took place on 7 November, ploughed the capital in to chaos. It caused severe traffic jams during rush hour, affected over 800,000 homes and brought the subway system to a grinding halt. Power also failed at Argentina’s Congress and the presidential Pink Palace but was quickly restored. Most of the city’s electricity was switched back on within two hours but some but some neighborhoods were left in the dark hours later.

According to Edesur, the failure of two high voltage lines resulted in the power failure due to increased pressure on the grid. However, it has recently been discovered that this was in fact not the case. Planning Minister Julio De Vido says that authorities will be investigating the real cause.

The outage comes after three days of soaring temperatures (around 33-35C), resulting in a record-high demand for electricity that has put extreme pressure on the energy grid.

Argentina’s electricity grid has experienced blackouts in recent years as economic growth triggers demand and price controls limit investments, reports Bloomberg. In May this year, Argentine electricity companies announced that they were losing millions each month due to the country’s 10-year freeze in energy tariffs. The companies have asked that the government increases tariffs in order to encourage investments in the country. But, the Argentine government refuses to increase the tariffs as it says that utilities have shown “handsome profits” since privatization in the 1990s, according to the Financial Times. Low cost power helped Argentina to recover during the country’s financial crisis in 2001 but as one former senior official explains: “They have kept the system too long and now they’re driving Edenor and Edesur to the wall.”

Argentina has been struggling with an unreliable electricity network for many years. The country’s
energy sector was hit hard by the macroeconomic crisis of 2002 and has been trying since then to recover whilst trying to meet the nation’s growing demand. Last year, the Inter-American Development Bank (IDB) granted a US$120m loan to Argentina so that it can improve the reliability and security of electricity services in its 18 provinces. The program will finance the construction or rehabilitation of 937.3km of transmission and distribution lines by 2015. The peak load served in the areas covered by the project will be increased from 876.1 MW to 1085.7 MW during the same period, according to the IDB.

The projects support the Argentine government’s effort to overhaul the country’s energy sector through its Federal Electricity Transmission Plan. The aim of the project is to restore electricity transmission capacity in Argentina and strengthen the transmission grid’s efficiency and reliability.

Last Word

Until the transmission network receives proper maintenance and upgrading, the country will continue to suffer in the face of blackouts. The sector is in dire need of finance to improve its power sector but utilities’ requests to increase tariffs, have been refused. One does wonder if the fines will prompt the distributors to find funds to kick-start maintenance projects or whether it will slow their progress as more cash leaves the sector’s coffers.

Sources                                               

BBC-Argentine capital Buenos Aires hit by major power cut

Bloomberg-Buenos Aires Power Cut as Heat Fuels Highest Demand This Year

Boston.com-Argentina’s capital hit by major power outage

Buenos Aires Herald-Some neighbourhoods still without power after mass blackout

Inter-American Development Bank-Argentina to strengthen electricity network in 18 provinces

Reuters-World needs $700bln in power grid upgrades

The Washington Post-Argentina fines electric companies for huge power outage in Buenos Aires