This is the southern hemisphere’s summer season, and power generators will be working at peak capacity. The expectation is that demand will exceed supply, with power rationing and even blackouts possible, forcing her to rethink Argentina’s energy policy. Unless President Fernández increases power prices and woos new investors for the power sector, the crisis will only get worse.

If the president wants to blame someone for the energy mess, she need look no further than her husband and former president, Nestor Kirchner. He cut power and natural gas prices earlier this decade following the peso devaluation, which helped boost GDP 36 percent from 2003 to 2006. But it also sent energy demand up and investment rates down. Argentina’s largest power distributor, Edenor, can only charge residential users $0.025 per kilowatt-hour while distributors in neighboring Chile and Brazil charge $0.11 per kWh and $0.115, respectively.

As a result, investments in power projects and others have been slow in Argentina. According to a study led by former central bank president Javier González Fraga, last year Argentina attracted only 60 percent as much investment as neighboring Chile, which is less than half Argentina’s size. Big electric power companies are now avoiding Argentina and are instead investing in countries like Chile and Brazil where electric rates are higher. Meanwhile the government’s policy of keeping residential natural gas prices artificially low has sent fuel demand up and supplies down, forcing a number of gas-fired generators to switch to more expensive diesel fuel. Thermal power plants provide about 45 percent of Argentina’s electric power and the switch has taken its toll on the generators, since diesel is hard on generators that are designed to run on natural gas.

Earlier this year, demand began to outpace supply, forcing the country to expand power imports and ration industrial use during peak periods. The fall and winter months were particularly hard for the country, with demand surging in response to unusually cold weather. To make matters worse, hydroelectric reservoirs were low, and the country’s Embalse and Atucha 1 nuclear plants were off-line longer than anticipated for maintenance periods. In July, President Kirchner finally articulated what everybody already knew: the country was suffering from an “energy crisis.”

Defenders of Kirchner’s energy policy are quick to point out that local companies like Pampa Holding and Sadesa have invested in the country in recent years. They have taken advantage of new government programs like Energy Plus, which woos local investors with unregulated rates for projects that add capacity to Argentina’s grid. But Pampa and Sadesa are operating on thin margins due to the country’s pricing policy, and lack the money to invest in the mega-projects that Argentina desperately needs. If she wants those projects built, President Fernández will have no choice but to increase power rates. That will not be such an easy task, as higher energy prices would further stoke Argentina’s double-digit rate of inflation.

Unfortunately, companies are not sure what to expect from the president, who did not discuss her plans for the energy sector during the campaign. Although she promised to continue her husband’s policies, this year’s crisis should force her to rethink that strategy.