News Article

Industry Has Not Seen the Last of CRE

Wed, 02/20/2019 - 17:00

Dissipating lingering fears, current and former CRE officers assured investors that the regulatory entity would not disappear. “For any government, regardless of political inclination, it is essential to have an entity that gives certainty to investors,” said Francisco Salazar, Coordinator at the International Confederation of Regulators and Former President Commissioner of CRE. “There must be professionals that are not subjected to changes in government administrations. This gives certainty to investors.”

On February 20, Mexico Energy Forum 2019 gathered three current and former CRE officers at the Sheraton Maria Isabel hotel to present industry leaders the reasons why CRE would not disappear, despite changes made by President Andrés Manuel López Obrador, including the cancellation of the long-term auctions.

Salazar spelled it out clearly: “CRE will remain for a long time and will be fundamental to the country’s goals for economic development. The Energy Reform made CRE a coordinated regulatory entity, giving strength beyond that of any Ministry. From a legal standpoint, Mexico has built a framework that guarantees CRE’s survival.”

According to Héctor Olea, President of Asolmex and Former President Commissioner of CRE, Mexico has been excellent in creating regulatory frameworks. However, the country fails to support these with proper instrumentation and operability. That is where CRE came in. After the crisis of 1994, Olea says CRE was strengthened to work as a mechanism to boost foreign investment and allow the creation of IPPs. In 2006, the commission took the next step and detonated the clean-energy market. Finally, with the support of CENACE and the Ministry of Energy, CRE laid down the framework to develop long-term auctions. “CRE creates new markets that bring new opportunities to investors. Its latest venture is focused on energy storage,” said Olea. “The industry must rally to defend its value.”

At the moment, it is business as usual for CRE, according to Rubén Hernández, Head of the Oil Products Unit at CRE. “The regulatory framework remains and we are working on a regulatory package to offer certainty, promote investment and reduce the regulatory burden,” he said. Hernández even highlighted priorities for the commission including boosting natural gas production and the exploitation of energy sources. “We must make our energy mix more efficient so we do not depend solely on oil,” he said.

Naturally, after the cancellation of the long-term energy auctions, uncertainty rose among investors regarding CRE’s future and its autonomy as a regulator. However, Salazar highlighted that Congress already tried to pass a law that gave new attributions to the Ministry of Energy thus removing part of CRE’s autonomy, but that was rejected due to pressure from the industry. Furthermore, he said auctions will have to be reactivated, provided the law does not change.

“CFE cannot buy energy directly from its own generation division. Though this is happening at the moment, it is only part of a transition period that considers legacy contracts and leads to greater competition,” said Salazar. “If the law were to change, tariffs would go up and that would be detrimental for the government.”

President López Obrador has remained true to his word of not changing the law, which should be an indication of auctions eventually returning, according to Salazar. He acknowledges that CFE has been strengthened under the new regime but he sees this as a boost to the company’s public finances, which opens the door for CRE to collaborate in determining efficient costs and ensure proper tariff implementations to protect users, companies and the government itself. “CRE does not undermine competition for anyone, including CFE,” said Olea.