Incoming Administration Will Face High Energy Costs: CIEP

The energy policy of the current administration has resulted in fiscal costs estimated at MX$1.8 trillion (US$90 billion) due to reductions in the Shared Utility Right (DUC) and capital contributions to PEMEX, according to the Center for Economic and Budgetary Research (CIEP). CIEP predicts that the incoming government will continue this energy policy, which implies opportunity costs for public finances, displacing social spending.

In the document, Energy Policy: Fiscal Challenges 2024-2030, CIEP estimates that continuing actions such as financially supporting PEMEX  and CFE, improving the National Transmission and Distribution Network, and maintaining subsidies for residential electricity rates would cost MX$2.195 trillion over the next six years, representing a cost of 1% of the annual GDP.

The report detailed that this amount would be divided into MX$1.371 trillion for capital contributions and a reduction of the DUC for Pemex, MX$245.68 billion for CFE to maintain its 54 percent share in electricity generation, MX$57.665 billion to strengthen the National Transmission and Distribution Network, and MX$517 million for subsidies on electricity rates.

CIEP indicates that, given the estimated reduction in public spending by 3% of GDP next year, the proposed actions for the next energy policy will require more public resources, which would mean a reduction in social spending.

CIEP Executive Director, Alejandra Macías Sánchez, noted that the current government has prioritized spending in PEMEX and CFE, which has hindered progress toward an energy transition. In 2021, 27.4 percent of total electricity was generated from clean sources, a figure that decreased to 21.9 percent in 2023, making it more difficult for the country to meet its 35 percent target for this year.