Electric Sector Under State Control

One of the most frequent lies of the regime’s officials, supported ad nauseam in the Open Parliament, about President López’s electricity counter-reform proposal, is that the State lost control of the sector with the 2013 reforms. This is totally false. The truth is that the state has never lost control, and this makes obvious theoretical and practical sense. The electricity sector includes components that are natural monopolies (such as the transmission and distribution networks) and has significant externalities associated with air pollution, greenhouse gas emissions, and also the well-being of the population and the general development of the country. It is an essential public service. Therefore, the control and regulation of the State is essential.

However, electricity generation is not a natural monopoly, nor is it a public good in economic terms, and it must take place in an efficient environment of regulation, but also of competition, private participation, and the market, in order to achieve efficiency and cost minimization, as well as the energy transition towards sustainability and clean energy. This is what the 2013 reform seeks.

State control is absolute. The electricity system and the electricity market have a single operator, which is the National Center for Energy Control (CENACE), which is an autonomous body of the State. CENACE has operational control of the national electrical system; performs the necessary studies and interconnects power plants according to criteria to ensure the reliability and stability of the system in a continuous balance between supply and demand; guarantees non-discriminatory access to the electricity grid; organize long-term auctions; dispatches power based on economic merit (which favors clean-energy power plants since their marginal costs are nearly zero: sun and wind, and the earth’s internal heat are free); authorizes the commissioning of plants and facilities; operates the Wholesale Electricity Market; determines the expansion, enlargement and modernization of the electrical system, the national transmission network and the general distribution networks; performs demand and electricity generation forecasts including intermittent generation to ensure reliability; incorporates elements for a smart electricity grid (essential for clean energy and the energy transition); coordinates with carriers and distributors; and guarantees the energy supply of the National Electric System in case of accidents and contingencies, among many other tasks.

The Energy Regulatory Commission (CRE) is an autonomous body of the State, impartial regulator, which determines tariffs, prices, contracts and compensation; grants Clean Energy Certificates and verifies compliance with Clean Energy obligations by generators and users; authorizes CENACE to carry out auctions to acquire power; and issues protocols for CENACE to manage power contracting in emergency cases. All this, equally, among countless other functions.

SENER is in charge of the Energy Sector Program; the National Electricity Sector Development Program (PRODESEN); the country’s entire energy policy, as well as medium- and long-term energy planning, and economic and social guidelines for the state-owned energy sector, the latter, through the Universal Electricity Service Fund financed by the Wholesale Electricity Market. SENER also grants concessions, authorizations and permits in energy matters, in accordance with the applicable provisions. It also establishes the obligations to use clean energy for large qualified users. Finally, the CFE is a productive State company that has a monopoly on the transmission network, the distribution networks, and until now, the basic supply systems for the population. It also participates in generating energy and competes with private companies in the markets.

No one intends to make the CFE disappear. Existing operational problems can be resolved administratively without any constitutional reform. Nor does anyone want the state to lose control of the national electricity system. What we do not want are unjustifiable, inefficient and corrupt monopolies and monopsonies, or for the country to fall into an energy crisis due to lack of investment and execution capacity for new projects. Nor do we want an absurd return to the predominance of expensive, obsolete and polluting fossil energies, nor to high costs and tariffs for the Mexican population and companies, nor to an unacceptable concentration of power in a single person (Bartlett); as intended by the electrical counter-reform proposed by President López.

@g_quadri