Eduardo Meraz
Director General
National Center for Energy Control (CENACE)
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View from the Top

Private Participation Slow but Steadily Growing

Wed, 02/22/2017 - 17:30

Q: What major challenge did CENACE face during the electricity market’s creation and how did it cope?

A: Time. The strong commitment of our staff and our close collaboration with the National Center of Electricity and Clean Energies (INEEL) were strategic actions taken to overcome our main challenges and underpin our success. Because the Mexican electricity market was designed using the experience of other markets, we could start our operations with previous knowledge of what were the best possible choices available thus reducing the chance of errors. We greatly benefited from the experience and knowledge of other grid operators such as ERCOT from Texas, PJM from the US Eastern market and CAISO from California, with whom we collaborate closely. I would also highlight the coordination efforts with key stakeholders in the implementation of the Energy Reform such as the Ministry of Energy, CRE, CFE, industry associations and private companies.

Q: How has private participation evolved in the electricity market and how did CENACE help to enhance trust?

A: We have witnessed a growing interest from the private sector in the electricity market as seen from the results of the two long-term power auctions conducted by CENACE. This confidence in the market is largely based on the same principles and values we follow in our role as a public decentralized organism, which acknowledges transparency and access to information as crucial to enhancing competitiveness. Trust is particularly strategic because the relevance and scale of the Energy Reform generate expectations accompanied by uncertainty among potential and incumbent market participants. The short-term market started operations with only three participants: CFE in different roles and two private generators. Now, four more private participants are operating in the spot market, including two qualified suppliers and two generators. There are other participants that have already signed the required contracts but have not started operations and some others have not obtained their permits. This evolution is natural and will continue as companies assess the benefits of entering the new market model. This is the main reason for CENACE to continue improving the Market Information System and responding to all the industry’s queries, providing explanations to all the players who require them.

Q: How will legacy projects impact the market’s development, for instance with financial transmission rights?

A: Financial transmission rights were applied by the end of 2016 for legacy projects. The payment behavior associated with these rights will determine whether or not it is the right moment to launch the first financial transmission rights auction, as they must be attractive enough to ensure adequate levels of participation. All legacy projects migrating to the new scheme can participate in these auctions, which could have an important impact depending on the scale of this migration and the actual congestions in the grid. The first financial transmission rights auction is expected to take place in late 2017 or early 2018 but it will largely depend on the date in which the manual is published.

Q: How does CENACE support private entities interested in entering the MEM?

A: The structure of the MEM offers an exceptional opportunity for its participants to enter a competitive environment within the evolving Mexican electricity industry. CENACE’s role is to ensure that potential participants have the requisite knowledge about the procedures needed to enter the market. We offered training courses in 2016 to all companies interested in becoming market participants. CENACE also held constant meetings with industry associations and public and private companies to dispel doubts and review specific cases. Every week we conduct an online meeting with market participants to analyze market behavior and results. Key among our activities is our official website in which we offer useful information for interested companies. To complement our virtual tools we are also working on the development of new technological applications to help participants with their decision-making with real-time information.