Fostering Technically Robust Fair PlayMon, 02/25/2019 - 12:42
Q: What insights has CRE gained as a member of the OECD’s Network of Economic Regulators?
A: The network's goal is to find ways for regulation to promote best practices in the regulated industry, promote innovation and provide benefits to users and consumers. One of the most important results of CRE’s membership in the network is the OECD’s study of the performance of Mexico´s energy regulators, published in Oct. 17, 2017, which included an evaluation of ASEA, CNH and CRE. The study concluded, among other findings, that these three regulators should be functionally connected since these agencies regulate the entire value chain of the oil and gas industry and CRE covers the entire electricity value chain. Another key insight has been the importance to the economic development of countries of having independent and autonomous regulatory bodies; beyond having it only mandated by law. Regulators must have a long-term non-political approach. Autonomy is crucial to dissociate the needs and drivers of policymakers and those of regulators that provide long-term certainty to markets.
Belonging to such an international network gives Mexico an opportunity to learn from how regulatory synergies work in other countries. For instance, in Mexico COFECE is the anti-trust regulator and works closely with CRE, while other countries merge these two roles into a single regulator. The NER provides us with valuable insight on best practices in data management and how to use it as a driver for change through behavioral insights. Anticipating disruptive technology trends is also a major component in these exchanges to prepare the country’s regulatory framework for the evolution of the regulated sectors in general, and for CRE specifically since technology will change the power sector. The magnitude of this evolution is such that new concepts, including distributed generation, microgrids and energy storage drastically change centralized, large-scale systems that predominantly dictated how the industry operated until now.
To apply every lesson learned, we are looking to increasingly adopt the sandbox approach, especially for new technologies, where through a collaborative strategy, regulators consider data and metrics provided by each specific technology. If the impact on final consumers is not as anticipated, regulators can go back to standard regulation. It is a tool often used for financial markets that could work well for the power industry.
Q: How does CRE achieve a balance between its twofold role as regulator and enabler?
A: Regulation does not imply total control over the industry it regulates. Making sure rules are followed implies promoting fair play and providing a level playing field. While CRE works to ensure the industry develops, grows and matures, the most critical premise is to provide clear and transparent rules, including seamless exchanges between industry and the regulator. It is equally important to have consequences when fair play is breached. Economic development is impossible if there are no consequences when rules and laws are not observed. This is especially true for former energy monopolies in Mexico. CRE must reject outside pressure to make sure the rules are followed.
Q: What is CRE’s focus as a supervisor of the long-term electricity auctions?
A: Long-term electricity auctions have been tremendously successful. While certain adjustments are in order, they are minor in scale. The challenge really lies in raising awareness and communicating the benefits of the auctions to the general public. The general perception is that despite the aggressively low prices in the auctions, electricity bills have not decreased. The general public must be made aware that changes and benefits in their consumption will be evident as renewable energy projects come online. The country urgently needs more clean, cost-effective generation as well as transmission and distribution infrastructure required to transport it to the consumption points. This will be possible through long-term electricity auctions, with transparent processes and by fostering better prices and better quality through competition.