Prying Open the Evolving MEM

(In order of appearance, left to right)
Moderator: Loïc Le Gall, Executive Director Power & Utilities of EY
Panelist: Enrique Giménez, CEO of Fisterra Energy Mexico
Panelist: Katya Somohano, CEO of CFE Calificados
Panelist: Israel Hurtado, Director General of Sumex
Panelist: Francisco Con, Business Development Director of CEMEX Energía

The evolution of the Wholesale Electricity Market (MEM) during the past year presented new challenges and opportunities for users all across the value chain, while creating user awareness of the costs involved, panelists agreed at Mexico Energy Forum 2017 on Wednesday at the Sheraton Maria Isabel in Mexico City.

“The key elements of the Reform were to create consciousness of electricity costs. The Reform allowed the creation of an index to gauge the value of electricity. The reform allows us to understand the figure of a qualified supplier. A good qualified supplier is an interpreter, they must translate technical speed into problem-solving speech,” said Enrique Giménez, Director General of Fisterra Energy Mexico.

Added Katya Somohano, CEO of CFE Calificados: “Customers must be aware of the different costs that constitute the value of the electricity they consume.”

The panel “Wholesale Electricity Market: Energy Trading & Price Dynamics,” moderated by Loïc Le Gall, Executive Director Power & Utilities of EY, discussed the evolution of the MEM, its participants and the challenges to come. The year saw important milestones such as the launching of the spot market and the creation of qualified suppliers.

A recurrent topic among the panel participants was the Regulated Tariff or Basic User Tariff.

“We cannot compete against the official regulated tariff. The challenge for the market is to match regulated tariffs with competitive market tariffs,” said Giménez. He added that there would be no real competition until the regulated tariff reflects market costs.

Francisco Con, Business Development Director of CEMEX Energía, did point out that creating regulations and manuals was not an easy task and that the Mexican authorities did quality work in record time. But he acknowledged the challenges companies like CEMEX face in the new landscape.

“Market participation is complicated because many of us were under the previous regulation. To exploit the many benefits of the MEM we need to partially migrate or restructure contracts,” he said.

Somohano invited her supplier colleagues to achieve better tariffs through efficient energy generation to compete with the basic tariff, especially since transmission and distribution tariffs are not something power producers can control. “CFE Calificados just celebrated its first private auction for the acquisition of 1 million CELs, for which we received over 50 offers with prices below those offered at the two long-term power auctions. The competitiveness of the tariffs suppliers can offer will be determined by their ability to obtain electricity market products,” Somohano said.

The role of qualified suppliers was the other pressing point on the panelists’ agenda. “A supplier is not a magician nor a miracle maker and it is certainly not a generator,” Giménez said. The panelists agreed that to offer a customer the best tariff, they must first understand their customers’ needs to create a tailored solution for them. The great challenge there will be to educate the user and develop a constructive relationship that will the implementation of a tailored process in the most competitive way. “A key element of the Reform is how it allowed consumers to understand the real value of electricity by creating indexed references and creating the qualified supplier as an interpreter between producers and consumers,” said Giménez.

As the first qualified supplier to operate in the MEM, SUMEX offered its insight on how the market functions on a daily basis. Israel Hurtado, SUMEX’s Director General, said the biggest concern is the lack of knowledge about the operation of the MEM, the spot market, the power auctions and the role of the different players such as qualified users, qualified suppliers and generators. Another major concern for him is the entry barriers that hinder competition. He gave the example of metering certification, where the existence of entry barriers and the fact that only selected players can validate metering devices hampers competition. “Barriers could result in a slowdown of the operation of the energy market,” he said.