Jesús Serrano
Energy Regulatory Commission (CRE)
View from the Top

Better to Remain Vigilant the Maintain Control

Wed, 02/22/2017 - 14:52

Q: How did CRE contribute to the energy industry’s main milestones in 2016?

A: We had many important events in the energy industry in 2016. It is worth highlighting CRE’s collaboration on the opening of the wholesale electricity market, two basic service long-term auctions as well as the first steps toward horizontal and vertical separation of CFE. Also, CRE issued the regulations for CELs, including the rules for the functioning of the registry and its penalties. As for natural gas and automotive fuels, 2016 was a year to delineate the rules and conditions for the Mexican market to open to private competitors. At the beginning of the year CRE issued a resolution aimed at establishing a Gas Release Program, which basically establishes a natural gas commercialization market. To accelerate the implementation of this market, CRE’s resolution forces PEMEX to cede 70 percent of its portfolio to other marketers.

Also in 2016, CRE together with the Ministry of Energy and CENAGAS presented a strategy for the natural gas market. In addition to the Gas Release Program, this strategy also includes the start of a permanent regime for natural gas transport, for which we established the rules needed for the transport system’s open access. This program includes three main elements: the migration to the new and permanent regime, which follows best international practices. The second element is the openness and free access to national and gas-import transport systems, especially those for imports because half of the gas used in the country is imported. The third element is generating user information. Our goal is to perform a gradual liberalization for the natural gas market. We expect to begin in the northern part of the country since we believe that is the region with the most competitive potential. Afterward we will continue with the rest of the country. Initially, there will be price regulation but as we go along and the infrastructure is developed we will experience price liberalization. The drivers of the Energy Reform are market openness, competition and the empowerment of users. We will also publish the conditions for the fuel market liberalization. According to the Hydrocarbons Law, market liberalization should not begin until 2018 but Congress decided to bring the date forward one year, allowing for the fuels market to begin flexibilization in 2017. By the end of 2017, we expect to have a completely flexible market in the entire country.

Q: What are CRE’s main challenges with these objectives?

A: The challenge is technical. We have to be very careful in the technical aspects as an error in one of the regulations could have consequences such as creating a distorted market or generating private local monopolies or noncompetitive markets. We are starting a market from zero and it is hard to know what value companies give to openness. It is a lot easier to find the balance once the market is already working because consumers, with their decisions, reveal the real value they give to it.

Q: What is CRE doing to involve all private players in the market liberalization process?

A: We are making an effort on various fronts to bring all private players on board. CRE is offering courses for companies to understand the new regulations. Our website also has tutorials on how to make certain processes or how to get a permit from us. In the case of more specialized matters or to provide certainty regarding specific processes, we have a hearings mechanism. If investors or private players have specific questions they can always ask for a hearing, a meeting with CRE’s commissioners to express their doubts. We can also agree to direct consultations with CRE’s team.

Q: What are CRE’s main priorities for 2017?

A: CRE will take over monitoring the electricity market in 2017. We will be defining tariffs before subsidies. The second challenge will be to encourage participation of qualified users. We also need to attract more qualified suppliers and optimize the CELs market because we will start the registration process for generators and suppliers .