Electricity in Mexico

Comisión Federal de Electricidad (CFE)

For many years the electricity sector in Mexico has been federally owned, with the Federal Electricity Commission (Comisión Federal de Electricidad or CFE) essentially controlling the whole sector.  Private participation and foreign companies were allowed to operate in the country only through specific service contracts.

Deregulation of the Electricity sector began in 2014 with legislative changes to introduce competition for generation supply, increase foreign investment, establish a market and to restructure parts of CFE for competition in an effort.  For residential consumers there will be no apparent change as price regulated supply will continue from CFE.

 

Electricity supply in Mexico relies heavily on thermal sources (75%), followed by hydropower generation (19%) and geothermal energy (2%).  This is changing as CFE looks to procure wind and solar renewable supply for the regulated market.

Electricity Deregulation in Mexico

Industry structure prior to reform

Prior to deregulation in 2016, Mexico’s electricity sectors was a vertically integrated monopoly called the Comisión Federal de Electricidad (CFE) CFE had limited oversight from the federal Secretaría de Energía de México (SENER). Starting in the early 2000s, Independent Power Producers (IPPs) were allowed to build generation but only under contract to CFE.   Also at this time, industrial customers were allowed to acquire electricity via self-supply from closely related sister company operating the generation plant.

New industry structure

Reforms to the Mexican electricity market will bring about new Independent Power Producers (IPPs) and new retailers and marketers selling to “Qualified Users”.  

Legacy CFE generation will be split into multiple subsidiary companies and legacy CFE and new IPPs will be allowed to participate directly in the wholesale market.

The Comisión Reguladora de Energía (CRE) was established to provide regulator oversight to industry functions that are remaining regulated.  These include the setting of transmission and distribution tariff rates and rules, granting generation permits, and setting of supply tariff rates for “Basic Service Users”.

An Independent System Operator (ISO) was created called Centro Nacional de Control de Energía CENACE), a government agency.  CENACE was created to run the wholesale spot market, operate the electricity system and dispatch and to provide open access to the electricity system to ensure IPPs wishing to  interconnect are dealt with independent of CFE.

In addition to operating the wholesale market CENACE will also administer a an annual market for Clean Energy Certificates for retail suppliers to fulfill clean energy portfolio requirements set by CRE.  This market will incent clean energy power producers to develop projects to meet clean energy portfolio requirements through the trading of Clean Energy Certificates.

CFE will continue to own the transmission and distribution system and can contract for 3rd parties to build and own transmission or distribution infrastructure under contract to CFE.  Basic Service Users (small commercial and residential customers) will continue to obtain supply from CFE under regulated cost-based tariffs.

Qualified Users (larger customers) may choose to buy regulated supply from CFE or can purchase unregulated supply from marketers or IPPs.

What does this mean for regular folks?

Nada nunca.  Unless you are a Qualified User (industrial or large commercial) you will get your electricity from CFE same as before.  CFE has changed the bill in order to tell us all a bit about what’s going on with disaggregated production costs but if you don’t know what the terminology means its not overly useful.