Argentina rationed electricity to companies and severed natural gas supplies to Chile as a cold wave prompted record demand for electricity in South America's second-largest economy.

The temperature in many parts of Argentina fell below freezing yesterday, pushing electricity demand to a record 18,300 megawatts, according to the country's energy regulator. Argentina cut shipments of gas to Chile to meet the surge in demand, forcing their neighbor to rely on residual gas in the pipeline.

Rolling blackouts and gas shortages in Argentina threaten more than four years of economic growth of over 8.5 percent per year. The ban on gas deliveries to Chile jeopardizes supply for an estimated 1.2 million residential users in eastern Santiago and may lead to increased energy costs for mining companies as power generators switch to more expensive diesel fuel.

"There's no short-term solution to the shortage of gas,'' energy consultant Francisco Mezzadri, the former head of natural gas operations at CMS Energy Corp., said in a phone interview. "Electricity prices have been frozen since 2002, a new pipeline from Bolivia has yet to be built and domestic gas reserves are declining. It's a critical situation.''

Contingency Plan

Chile's mining companies may face rising energy costs as generators try to pass on higher costs related to running power plants with diesel fuel, Senator Ricardo Nunez, chairman of the senate energy committee, said in a phone interview. Chile supplies 34 percent of the copper from mines worldwide.

"This could affect mining companies' earnings significantly,'' Nunez said.

Chilean Energy Minister Marcelo Tokman said the country has a backup plan to secure enough natural gas for homes should supply from neighboring Argentina run out.

"There would be normal gas supply for the bathroom and the kitchen,'' Tokman said today in comments broadcast by Television Nacional. "We're talking about a contingency plan for an eventuality that we don't think is going to happen at this point.''

Chilean President Michelle Bachelet said she expects Argentina to follow through on commitments to deliver gas.

"Argentina is passing through an exceptional moment,'' Bachelet said in a news conference during a visit to Helsinki. "But there is an agreement that this will be resolved tomorrow.''

Schools Closed

About 100 schools in Buenos Aires province are closed today for lack of sufficient heating, newspaper Clarin reported. The national weather service predicted the below-freezing temperatures will continue tomorrow before rising later in the week.

Cristian Folgar, Argentina's undersecretary for fuels, said in an interview with state-run Telam news agency that the country won't have problems meeting demand.

"We're calm,'' Folgar said. "Our two systems of gas and electricity are functioning at full capacity and this will be sufficient to meet the demand we have.''

Norberto Garcia, president of the Argentine Chamber of Toy Manufacturers, said his industry plans to shift production times in July, the peak production period and the middle of winter, to avoid blackouts.

"In July we'll probably have to work two shifts and we may need to work at night, when energy demand falls,'' he said by phone from Buenos Aires. "When a businessman invests in a company, he counts on being able to at least get basic services.''