One of the main non-market advantages that the Federal Electricity Commission (CFE) and Pemex receive over private companies in Mexico is related to access to capital, noted the Department of State (DOS) in an annual investment report.
In addition to receiving direct budgetary support from the Ministry of Finance and Public Credit (SHCP), both entities also receive implicit credit guarantees from the federal government.
Likewise, the DOS adds, both can borrow funds in the public markets below the market rate that their corporate risk profiles would normally suggest.
In addition to budget support, the Energy Regulatory Commission (CRE) and the Energy Secretariat (Sener) have delayed or halted the necessary permits for new private sector service stations, fuel terminals, fuel imports and power plants, which is, according to the DOS, an additional non-market advantage for CFE and Petroleos Mexicanos (Pemex).
Independent power generators were authorized to operate in 1992, but were obligated to sell their output to the CFE or use it for self-supply.
DOS claims that these legacy self-supply contracts have been criticized with an electricity reform law and a proposed constitutional amendment giving the government the ability to cancel contracts it deems fraudulent.
Under the 2013 reform, private power generators can now install and manage interconnections with the CFE’s existing state-owned distribution infrastructure.
Also, the 2013 reform obligated the government to implement a National Program for the Sustainable Use of Energy as a transition strategy to encourage the development of clean technologies and fuels and reduce polluting emissions.
Executive management has identified increasing CFE-owned power generation as its top priority for the company, breaking with the company’s recent practice of contracting private companies to build, own and operate generation facilities.
Changes to the Mexican Constitution in 2013 and 2014 opened up power generation and commercial supply to the private sector, allowing companies to compete with the CFE. Mexico held three long-term energy auctions since the reforms, awarding more than 40 contracts for 7,451 megawatts of power supply and clean energy certificates.
CFE remains the sole provider of transmission and distribution services and owns all distribution assets.