The increases in electricity rates announced by the government have had a strong impact on the costs of SMEs, according to the production associations of Ñuble. According to the leaders’ estimates, energy currently represents between 15% and 30% of the costs of companies, depending on the type of activity and the hours of operation, which is why they raised the need to support small and medium-sized companies, in order to avoid further job losses in the region.
Following the freezing of electricity rates for the past five years, increases in electricity bills will begin to take effect starting July 1 in a gradual process that will extend until the second half of 2026.
According to estimates by the Ministry of Energy, taking into account the entry into force of Law 21,667 on the Stabilization of Electricity Tariffs, increases for regulated customers in the Ñuble region will vary between 7% and 21% in July 2024, depending on household consumption. Meanwhile, in October, increases in final bills will be recorded ranging from 26% to 33%, compared to current rates. By January 2025, rates in Ñuble will accumulate an increase of up to 41% compared to current rates. However, from July 2025, the increases will begin to ease.
However, these are estimates, since other variables such as the exchange rate have yet to be considered and the respective tariff decrees have yet to be known; in addition, these are average figures, since in some municipalities and among rural clients the variations might be greater.
Increase of up to 71% in Yungay
A report by the consulting firm Energie revealed that, on average nationally, an increase of around 62% is expected in the bills of regulated (residential) customers, depending on their level of consumption. Additionally, with the entry into force of the new decrees, significant increases in the rates of small or medium-sized commercial, agricultural and industrial customers in rural areas of the country will materialize, of up to 90% in the final bill depending on their commune and tariff option.
For example, a residential customer who consumes an average of 400 kWh/month and pays $55,185 will pay $77,380 for the same consumption in July, and more than $83,000 in October of this year. On the other hand, an industrial or commercial customer in a rural area who currently consumes 4,800 kWh/month and pays $1,000,000 will pay up to $1,900,000 for the same consumption in October of this year, depending on the commune in which they are located.
For the Ñuble region, the report cites the example of the municipality of Chillán, where increases for BT4.3 commercial and industrial customers will be up to 53%; while for AT4.3 customers they will reach up to 39%. It also highlights the case of the municipality of Yungay, where rural commercial and industrial customers will suffer increases of up to 71% (BT4.3) and 54% (AT4.3).
Support instruments
Alejandro Lama, president of the Chamber of Commerce, Industry, Tourism and Services of Chillán, expressed his concern regarding the increases in rates, “which will greatly affect SMEs, depending on the activity they carry out, because there are some stores that close at 6:00 p.m., but there are also sawmills, factories, hotels and restaurants that use a lot of electricity and, therefore, will be impacted much more.”
“Let us agree that this is not the right time. Although we understand that there was a freeze on rates, we are now in a situation where sales are poor and there is a very high unemployment rate in the region, which has reached double digits. There are many difficulties in dealing with these increases,” said the union leader, who stressed that “it would have been better to adjust prices starting in the spring, because in winter rates are already higher following 6:00 p.m.”
He also said that the adjustment “should have been more gradual, because the government talks regarding gradualness, but what we see is that in July and October we will have a significant increase in rates.”
According to Lama, “the increases in operating costs will have to be transferred to prices in order to cover this higher expenditure; the problem is that this will mean lower demand, that is, lower sales, and if this happens, employment will also be put at risk.”
On the other hand, he stated that, “perhaps an interesting solution would be for the Ministry of Energy to provide facilities so that SMEs can, in some way, become self-sufficient in energy through solar panels, through subsidies, as has been done with the program “Give Energy to Your SME”, which has been a positive initiative in which we participated in the previous government and which yielded good results.”
The trade leader recalled that SMEs, in addition to the problem of low sales, “are carrying a backpack of debts that they have been dragging since the pandemic, they are all paying their dues, so it would be important to know if the Ministry of Economy is evaluating any measure that would allow mitigating the liquidity problem that is coming, for example, some soft credit.”
Vulnerable sector
The gastronomy and entertainment sector is one of the most vulnerable sectors to price increases, due to the high dependence on electricity. July Llevul, president of Gayen, the trade association that brings together companies in the sector in Chillán, said that “it is a difficult situation; we are SMEs, not large companies, and the increase of approximately 40% will affect us greatly. Consider that we pay bills of 1 million 200 thousand to 1 million 600 thousand pesos, in my case, for example, electricity represents regarding 15% of my costs, everything is based on electricity, from machines, refrigerators, lighting, air conditioning to ice making, so the impact will be very noticeable and in any case it will have to be passed on to the final price for customers, which will translate into lower sales.”
In addition, the leader criticized “the lack of information in this regard. We still don’t know for sure how much the increase will be for each one, which, in reality, is the payment of a debt, so I think there should be more transparency on the part of the respective organizations, to know how much each one owes and for how long we will have to pay that debt; I can also ask myself what happens if I am just starting out. Should I also be responsible for that debt?”
July Llevul anticipated that “we will also have increases in inputs, that is certain, for example, frozen foods will go up, because electricity is present in everything; this will put pressure on inflation and increase unemployment. We are already the poorest region, we are the region with the highest unemployment in the country, the economic conditions are too difficult, we are surviving an economic crisis and this, without a doubt, will hit us even harder. We hope that our authorities visualize this situation, which is not only in our sector, but in many SMEs in our region.”
The businesswoman said that the sector is operating with a minimum number of workers, so, in view of the spring-summer season, when sales are increasing, it is most likely that this need will be covered with part-time staff.
Destruction of jobs
“Energy is currently one of the main concerns of the sector. It will have a strong impact on the agricultural sector. According to Copelec estimates, there is talk of a 50% to 60% increase in the cost of energy for agricultural companies, which is tremendous,” said Carlos González, president of the Ñuble Farmers Association.
The leader stressed that electricity represents between 25% and 30% of the costs of agricultural companies. He pointed out that “there are many fields that are irrigated with technical means and have to use pumps for irrigation, fertigation; there are those that have deep wells, those that have pivots, and not to mention the cold storage rooms. Farmers are going to be in a very difficult situation, and if we add to that the years in which they have been hit, the large fires, the inclement weather of last year and this year, which, in addition, has been terrible in commercial terms for traditional crops, in which everyone lost money, because nobody made money with rapeseed, with wheat, or with oats. I see a very big cloud on the horizon.”
In terms of employment, he acknowledged that the agricultural labour market has been showing a strong decline. “You can see that in the fields, you talk to your colleagues and they are all firing people, they are keeping just what is necessary; a farmer who had eight workers fired six and kept two, I asked him how he was going to do with the tasks and he replied that he was going to hire services, for example, for sowing; my neighbour had five workers and kept two. That is why I am not surprised by the statistics that show a high unemployment rate in the sector,” he commented.
González recalled that, as a trade union, “for three years we have been asking the authorities to promote the use of photovoltaic panels in the fields, to strengthen the competitive instruments to install photovoltaic panels and generate our own energy; but it has been slow, with little response.”
The unions are working on a proposal to present to the Regional Government of Ñuble and to the sectoral authorities, in order to address the strong impact on companies with different measures.
“We believe that resources should be injected into the agricultural sector; the Regional Government has a significant budget, they have financed a large number of projects, so, for example, they might allocate $5 billion for solar panels,” the agricultural leader proposed.
He also proposed reactivating the subsidy for labor retention. “I remember that last year it was done at a national level and perhaps this year it can be implemented at a regional level. I know that resources are very scarce, but that subsidy worked very well in the sector,” said Carlos González.
Alternatives are being studied
The regional secretary for Energy, Dennis Rivas, stressed that the Stabilization Law “responsibly provides for gradual increases in the rate.”
He also pointed out that, “in parallel with the implementation of the electricity subsidy, a technical committee is working to analyze and propose different alternatives to expand the level of coverage, but all of this is subject to a new source of financing.” In this context, he noted that support for any segment is not ruled out, for example, SMEs.
The regional minister revealed that, “in the same way, we are working, in the preliminary stage, to launch a project with the Regional Government, associated with SMEs, with an initiative called “Give Energy to Your SME”, which was done by the Ministry of Energy, and we want to do something similar to this project, but focused on SMEs in Ñuble, which might particularly be the implementation of photovoltaic generation systems, which would impact the electricity bills of SMEs. But it is not defined yet, it is not closed, but we hope to have good news soon.”
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