Time Needed to Achieve SophisticationWed, 02/22/2017 - 13:28
Q: What drove Enerlogix Solutions to focus its business on qualified users?
A: The Energy Reform provides the opportunity for more transparency and better costs for large energy users but to participate and secure the advantages of a deregulated market companies need to register with CRE as a qualified user. The value we bring as consultants is somewhat limited for those who want to stay under the current CFE tariff rate or basic service structure. These companies can only lower their costs by implementing energy-efficiency measures, which many Mexican companies have already done admirably. As consultants we help companies take advantage of the financial benefits of the Energy Reform. Our main objective is to help companies understand how the newly deregulated market works, guide them on assessing financial opportunities and risks, negotiate favorable contracts as well as determining how they can benefit from alternative energy providers.
Our job is to know the retailers, to analyze and evaluate each company and to determine if their business and operational plans match our clients’ needs. There are more than 20 retailers already registered with CRE or in the process of getting their certification. Most companies are already overwhelmed with their own business operations and do not have the time to analyze the offers from the many different providers. We can filter and narrow the list of suitable suppliers down to a handful of viable options. Most of the retailers working in the market are Mexican companies or Mexican entities that are owned by international corporations from countries that already have a deregulated market. We have not yet seen American suppliers coming to Mexico because they are waiting for the pending market regulations and business-practice manuals to be published in 2017. After that we expect to see a wave of American companies entering Mexico and bringing new options for Mexican off-takers.
Enerlogix Solutions is an energy-efficiency and administration consultancy for commercial and industrial users, focused on risk management for both commercial and industrial energy demand and supply.
Q: What are the main challenges the company identified when entering Mexico?
A: Our main challenge is the lack of information and understanding on how a deregulated market works and how it can benefit energy consumers. Most Mexican companies lack experience operating in a deregulated energy market. Many of our clients are American businesses with Mexican facilities that have experience in US deregulated markets but do not understand Mexico’s new energy paradigm. Since our arrival in April 2014 we have focused on educating and helping companies understand how the wholesale energy market (MEM) operates and doing financial analysis as to if and when an organization would benefit by transitioning from basic service to qualified user.
Q: Why are companies apprehensive about becoming qualified users and how can you help them to feel comfortable?
A: It has been two years since the approval of the Energy Reform but there is still a void of understanding about how the market works. Right now, the majority of large industrial companies are in a holding pattern. Electricity rates are going up again and the new basic service rates soon to be published will be strongly linked to the US dollar exchange rate, Henry Hub natural gas prices and CFE operational costs. The market is designed to provide savings and reduce long-term price volatility risks for qualified users. We do not recommend large industrial users to stay in basic service. Once companies understand the MEM fundamentals, they will see the benefits of proactively managing their energy portfolio as a MEM participant. We saw similarities in the US but in the end it is understanding how the MEM operates and how it can benefit a qualified user that will motivate businesses to make the change. Most companies are still waiting for financial transmission rights and pending business practice manuals. CENACE also needs to publish real-time market data. We see a real interest from US companies to enter the MEM but they want all the rules to be defined. Large retailers need transparent data so that will be a key factor them deciding whether to participate in the MEM.