CRE Goes on Permit-Approval Spree In 2022

Selling gasoline and diesel is regulated by permits approved by regulator CRE, but this permitting has slowed down in recent years, partly due to the pandemic. In 2016, a total of 679 permits were issued, but that number decreased. By 2021, only 114 permits were approved. However, this year the CRE has approved more permits than in the previous two years combined. From January to September 2022, CRE released 300 permits to service stations, a 275 percent year-over-year increase. Fifty percent of the permits were approved this September.

"There are several reasons why [CRE’s] learning curve has not diminished, among which are the omission of clear rules for the authorization procedures and staff turnover, not only due to the dynamics of a newly opened market but also due to government changes,” explained Alejandro Montufar, CEO, PETROIntelligence.

Due to pressure from the private sector and foreign investment stakeholders, CRE might release around 200 further permits before 2022 ends, reported Forbes. Some permits had been stalled for up to 24 months. According to Marcial Díaz Ibarra, President, the Association of Regulation in the Energy Sector (ARSE), the government’s stop in permitting appears to be ending, as the year has seen 400 energy sector authorizations issued.

At the moment, Mexico is expecting to have concrete answers ready for the consultation process started by the US and Canada under the USMCA’s Dispute Settlement Chapter due to Mexico’s alleged violations of the trade agreement because of a shift in energy policy. International pressure also mounted because of the stalked permits. “I think this is the year in which the regulated exercised their rights and pressured the authorities to respond and break the administrative silence as well as the drought in permits. We can see the sector improving, but there are still many challenges to overcome. There is regulation in the pipeline close to being published and one must be attentive to know how to adapt," Díaz commented.

The landscape for private players continues to shift following years of liberalization during the Peña Nieto administration. Last month CRE suggested modifications to eliminate net metering for smaller solar systems, greatly diminishing the economic viability of a photovoltaic solar system. Earlier, President López Obrador had hoped to modify the electricity dispatch system in order to favor the CFE’s power plants, grant permits according to criteria established by the energy ministry and grant Clean Energy Certificates (CELs) to CFE’s older power plants. The government furthermore aimed to remove CFE’s obligation to purchase clean electricity developed by private companies at auctions and to review contracts signed with private players in the past.

Amid the consultation process started by the US and Canada under the USMCA, faster permitting may be a way for Mexico to appease its northern trade partners.