President Javier Milei issued a decree declaring an emergency in the energy sector on Monday and ordered the energy secretariat to start revising electricity and gas tariffs. This marks the first step in the government’s plan to cut utilities subsidies, which will lead to significantly higher prices for end users.

The energy emergency will last until December 31, 2024, by which time the new tariff scheme should be in place, according to Monday’s decree, which bears the signatures of Milei and his ministers.

Last Tuesday, Economy Minister Luis Caputo announced an emergency measure package that included a reduction in utility subsidies. These have been segmented according to income and consumption since 2022, but the incoming government wants to cut them further. Caputo clarified on Wednesday that this would happen gradually.

“It is necessary to adopt short, medium and long term measures that will allow the continuity of the provision of electric energy and natural gas transport and distribution public services, and ensure supply,” the decree states. It is a form of presidential decree known as a “decree of necessity and urgency,” or DNU.

Although the Constitution bans presidents from legislating, they are allowed to pass DNUs in situations that are so urgent or exceptional that they cannot wait to pass through Congress. DNUs are explicitly banned for criminal, tax and electoral issues, as well as changes to the framework for political parties.

The decree orders Energy Secretary Eduardo Rodríguez Chirillo to implement a program to “establish prices in competitive and free-access conditions” while “maintaining revenue levels in real terms and covering investment needs.”

Caputo said Sunday during an interview with LN+ channel that the government plans to cut a third of the current energy and transport subsidies each year, meaning that consumers will pay the full tariff in three years.

He added that the government wants to subsidize demand instead of supply. “We will tell people that they have a certain amount of kilowatts to use in a month,” he said.

“If you only use that amount of kilowatts, you will keep the subsidy. Otherwise, you will start paying another price.” Any amount of electricity or gas used above that limit will be paid at full price.

Critics have pointed out that many impoverished families are likely to fall through the cracks. Those who do not have a domestic gas supply, for example, may consume more electricity because they use it to cook.

In Argentina, modifications to utility tariffs have to be approved at a public hearing. If this new scheme is approved in December, it could be applied in February, Caputo said last week. Otherwise, it will be applied in March.