Electricity sector in Mexico
Attempts to reform the sector have traditionally faced strong political and social resistance in Mexico, where subsidies for residential consumers absorb substantial fiscal resources.
Expansion plans for the period 2006-2015 estimate the addition of some 14.8 GW of new generation capacity by the public sector, with a predominance of combined cycles.
However, the Comisión Federal de la Electricidad (CFE), the state-owned utility, is still the dominant player in the generation sector, with two-thirds of installed capacity.
Total private generation permits awarded by CRE as of September 2009 are summarized in the table below:[11] CFE holds a monopoly on electricity transmission and distribution in the country.
[4] The 750 MW El Cajon hydroelectric plant in Nayarit, which started operations in November 2006, is the latest completed large project.
[15] The project named SEGH-CFE 1, located in Puerto Libertad, Sonora, Northwest of Mexico, will have capacity of 46.8 MW from an array of 187,200 solar panels when complete in 2013.
[19][20][21] Source: SENER 2009, Programa especial para el aprovechamiento de energías renovables[15] Source: SENER 2009, Programa especial para el aprovechamiento de energías renovables[15] Mexico has a large geothermal potential due to its intense tectonic and volcanic activity.
[15] Source: SENER 2009, Programa especial para el aprovechamiento de energías renovables[15] Mexico also has a large potential to produce energy from biomass.
During this decade, the government also created Compañía de la Luz y Fuerza del Centro (LFC) to supply electricity to Mexico City and the neighboring states.
In addition, the surge in oil prices of the 1970s provided a windfall to oil-rich Mexico, which allowed the country to maintain substantial subsidies for electricity generation.
[24] The Energy Regulatory Commission (CRE) was created in 1993 as an autonomous agency in charge of regulating the natural gas and electricity industries.
[23] However, its functions were only related to private power producers (e.g. award of permits, arbitration, tariff studies) and did not cover CFE and LFC.
In 1999, President Zedillo sent an ambitious bill to Congress requesting a change of the Constitution and allowing for the unbundling of the sector, including the creation of distribution companies under 3-year concessions.
Both reform attempts failed, opposed on grounds that the electricity and, more broadly, the energy sector is strategic for national sovereignty.
The CRE is responsible for developing rules and norms regarding the implementation of LAERFTE, including provisions for promotion, production, purchase and exchange of electricity from renewable sources.
The CRE, in coordination with the Secretary of Finance (SCHP) and SENER, will determine the price that suppliers will pay to the renewable energy generators.
On 12 October 2009, the police seized the offices of the state-owned Luz y Fuerza del Centro, dissolving the company, laying off the workers, and putting its operations, which supply power to 25 million Mexicans, under the control of the CFE.
[28] The energy sector in Mexico was reformed by an initiative that president Enrique Peña Nieto presented to the Congress of the Union on 12 August 2013.
In 1960 a protectionist reform had made it impossible for any private company to participate in the energy sector, so the 2013 decree restored Article 27 to its previous state and included a similar provision for developing the electrical sector: a market for electricity generation would be established in which private entities could participate, but the control, transmission and distribution would remain an exclusive task of the state as a public service.
[33] These reforms meant that in November 2015 the first public offering for private generation and CELs was made, with a decision of the winning bidders being announced on 30 March 2016.
[37] On 1 February 2021, President Andrés Manuel López Obrador (AMLO) sent an initiative to reform the Electricity Industry Law to the Congress of the Union.
[38] AMLO insists that previous reforms were made with the intention of privatizing the energy sector and will require either massive subsidies or huge price increases for consumers.
For 2008, it was estimated that the subsidies paid through electricity tariffs to final CFE and LFC consumers by the Federal Government amounted to US$10 billion[3] (close to 1% of GDP).
Due to budgetary restrictions, the government realized that it could not provide all the resources needed and decided to complement the public sector's efforts with Pidiregas, a deferred financing schedule.
This mechanism, which only applied to investments carried out by PEMEX(Petróleos Mexicanos) and CFE aimed to create the conditions for the penetration of private initiatives in hydrocarbon exploration and electricity generation.
The State assumes the risk since PEMEX or CFE sign the contract as guarantee, while the investors recover their investment in the agreed time.
The National Commission for Indigenous People and SEDESOL (Secretariat for Social Development) also finance an important share of grid extension.
Conversely, in period of low demand in Baja California, surplus electricity and base load (i.e. geothermal and combined cycles) could be exported to the SIN.
In addition, the interconnection would open new opportunities for electricity exchanges with power utilities in Western United States through the existing transmission links with California.
In September 2009, there are 47 energy-related registered CDM projects in Mexico with a total emission reduction potential of about 3.5 million tons of CO2 equivalent.
