In 2022, the Argentinian government announced a reform in the energy subsidies regime implemented thus far. It implied shifting from a universally subsidized scheme to a targeted one, through a segmentation of users in three groups according to their economic status, in order to reduce the fiscal cost of the transfers and to better focus the subsidies to households in need of them. The aim of the paper is to evaluate both the effect on energy poverty that the implementation of the new regime had and its distributional incidence; namely, whether it contributes to a more egalitarian income distribution or not. First of all, an evaluation of the normative framework of the energetic sector is conducted from a political economy perspective. Secondly, using microdata from the National Household Expenditure Survey (2017-2018) a microsimulation exercise is carried out in order to estimate the levels of energy poverty before and after the segmentation and to establish the distributional incidence of the policy. It is found that the subsidies analyzed, although progressive, present a series of flaws that are common to other regulations of the energetic sector in Argentina. Shifting away from the universal subsidy system constitutes a substantial improvement; nevertheless, some aspects of the policy should be revised. It’s also found that the energy poverty levels rise as a result the implementation of the segmentation, almost entirely due to the impact of the higher energy costs faced by the households classified as belonging to the high income group. Finally, the administration of the subsidies, though correctly targeted to poorer households, doesn’t eliminate the deprivation situation. It’s hypothesized that a complementary policy that aided low income users to improve the energetic efficiency conditions of the households they live in could help the energy subsidies to have a larger effect and reduce the incidence of energy poverty within the lower income group.
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