By Taos Turner

BUENOS AIRES--Argentine utility holding company Pampa Energia SA (PAM,PAMP.BA) said Wednesday it is still awaiting news from the government about possible plans to help alleviate the ever-worsening financial crisis affecting the electric power industry.

The company's distribution unit, Empresa Distribuidora y Comercializadora Norte SA (EDN, EDN.BA), or Edenor, is in dire straights and urgently needs new regulatory rules to help the distributor pay wages and invest in capacity.

Pampa Chief Executive Ricardo Torres said the government is completely aware of the strained financial situation facing the electric sector and said he expects the government to come up with new regulations sometime soon.

"I don't think this is a stable situation and I expect really to have news in the short-term--if that's 15 days, two months or six months or a year, really that's out of my reach," Mr. Torres said in a quarterly conference call with investors.

Mr. Torres said wages and other labor costs account for about 75% to 80% of Edenor's operating expenses. Those costs have been soaring year after year amid annual inflation that economists estimate now totals around 25%.

To solve Edenor's financial problems the government will have to address labor costs and related payments, he said. Mr. Torres said this could mean getting government approval to raise rates and pass on costs to customers, or at least to some segments of customers.

"They (in the government) should decide who will contribute to that payment," Mr. Torres said, noting that the government essentially needs to make a "political decision" to let distributors raise rates or find some other solution. "So we are waiting for news on that," he said.

Argentina's government has vowed to keep energy prices cheap for customers and companies, saying that this helps keeps the country competitive and helps underpin economic growth. But the desire to keep prices low has made it virtually impossible for energy companies, especially power distributors, to make a profit.

Mr. Torres noted that Argentina's second-largest power distributor, Edesur, a unit of Italy's Enel SpA (ENEL.MI), recently ran out of cash and had to delay making payments to the electricity board, Cammessa, a largely state-run company that manages the wholesale electricity market.

Pampa and Edenor have provided the government with all relevant business and industry information and are simply waiting for the government to decide what kind of solution to offer the sector, Mr. Torres said.

"We are not far from reaching the situation of Edesur," he said.

Argentina froze utility rates in 2002 after the country defaulted on its sovereign debt and devalued its currency, which had been tied 1-to-1 to the U.S. dollar. The idea was to provide temporary relief to people and companies battered by what some say was the worst economic crisis in Argentine history.

But Argentina quickly recovered and the economy almost doubled in size between 2003 and 2010. Rapid growth and low rates caused electricity demand to increase about 4% a year, outpacing the capacity of companies to invest in infrastructure.

In previous conference calls, Mr. Torres has said the only scenarios he sees in terms of government support for the sector are to increase rates or provide direct financial aid to utilities.

Earlier Wednesday, Pampa said its second-quarter net loss widened 68% partly because of surging costs. The company posted a net loss of 228.5 million pesos ($49.5 million), versus a loss of ARS136.1 million in the second quarter of 2011.

Meanwhile, Edenor posted a net loss of ARS259.2 million for the second quarter, also due largely to rising operating expenses. The company lost ARS88.9 million in the same quarter the year before.

Write to Taos Turner at taos.turner@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires