Empowered States Strengthen New Energy Model

Q: How is CRE supporting state-level initiatives that target Mexico’s energy transition?
A: While CRE does not have the faculty to regulate the operational aspects of state and municipal-level policies and initiatives, it is highly active in sweeping across the country’s states and key municipalities to foster exchanges with local authorities, corporations and academia. These interactions foster the inclusion of energy as an integral and critical part of economic development and investment attraction within local government projects. The Energy Reform unlocked the oil, natural gas, LPG and electricity markets, creating a range of investment opportunities. These can fail to detonate when they lack the support of local and state authorities. When we went to Morelos and Sonora, we emphasized the pressing necessity of unifying local regulation with federal legislation and these states complied. Several major power generation projects can be halted due to lengthy local permitting procedures or because they are inconsistent with federal regulations. When state governments fully grasp the relevance of Mexico’s new energy model and its potential benefits for the state, they often request CRE’s support to showcase these benefits, together with C-level executives and representatives from FIDE, INEEL or ASEA. Through dialogue, we incentivize the breaking down of entry barriers due to dissonant local regulations. Other states such as Hidalgo, Jalisco, Puebla, Veracruz, Baja California, Quintana Roo, Sinaloa, Tabasco and Tamaulipas have created local institutions that address energy topics as well.
Q: What valuable insights has CRE gained from interacting with state energy clusters?
A: During CRE’s state visits, we dissect how the local government and the cluster are working together to attract investment and strengthen the different links of the industrial transformation value chain, the commercial support each receives and how it detonates state development. As these initiatives grow, they expand beyond the states’ border limits. Oaxaca, for example, created its own cluster based on Coahuila’s blueprint. The cluster model is working so well toward its objectives that we witnessed the creation of the association of state energy agencies in Colima. It gathers government offices as well as clusters and provides an experience-sharing platform, where discussion centers on best industrial and commercial practices, the issues they are facing and areas of opportunity to capitalize on.
Q: How is CRE working to transfer the benefits of the wholesale electricity market to basic supply?
A: Basic supply operates under a specific scheme that is different from the wholesale electricity market. It works under a regulated electricity tariff. Our vision for basic supply is to alleviate its heavy load not only in terms of federal budget but also in terms of hampering the growth of basic supply and the entry of new players to this specific niche. So far, CRE has awarded three additional permits parallel to the sole basic supplier, CFE. These three players are poised to enter the basic supply fray as soon as they comply with a series of prerequisites, among which is long-term electricity auction participation to purchase energy, power and CELs. Although we are not expecting to develop a basic supply market, we are anticipating a service-based competition.
Q: What is your assessment of CFE’s obtention of an electricity commercialization permit from the US FERC?
A: The implications of the obtention of this permit are twofold. First, the recognition of a productive enterprise of the state such as CFE from a foreign regulator and being on par with international requirements to compete in a market where supply and demand set the tone. Mexico has signed bilateral contracts in the US international market for electricity supply toward Mexico and it makes sense to do the same to trade our electricity surpluses. Second, CFE’s fundamental mandate is to add value in the development of its activities, which opens a new chapter with this permit: acting competitively in a foreign market. To capitalize on this permit, CFE will have to comply with international standards, strengthening the productive enterprise of the state in the long term.

Luis Pineda’s career includes working as President of the Federal Labor Board of Ciudad Victoria, Tamaulipas, Head of the Internal Control Organ and the Responsibilities and Complaints area of PEMEX Petroquímica and the Ministry of Finance.