South Texas-Tuxpan Gas Pipeline Helps CFE Lower Fuel Costs

The Sur de Texas-Tuxpan gas pipeline helped the Federal Electricity Commission (CFE) lower its fuel costs in 2020.

In general, the CFE presented a decrease in its fuel costs, mainly due to lower consumption of fuel oil and natural gas in 2020, and negotiations of downward fuel prices by EPS CFE Generación I with CFEnergía and Pemex.

This trend was also influenced by the price of the molecule, which decreased due to greater availability of continental natural gas from the start of commercial operation of the South Texas-Tuxpan gas pipeline (Marino), which allowed the CFE to reduce the consumption of Liquefied natural gas that has a higher cost.

In summary, according to the CFE, the decrease in fuel costs was not enough to compensate for the loss of income, derived mainly from the exit of two large capacity plants from the Legacy Contract, a decrease in the dispatch of CENACE, a drastic fall of the Local Marginal Prices; as well as the impacts caused by the modification of the Collective Bargaining Agreement and all the effects associated with the health contingency due to Covid-19, which in combination caused a loss of more than 13,000 million pesos.

Fuel costs

Last year is considered an atypical year due to different external characteristics that affected the results of the EPS CFE Generation I.

Among these particularities is the case of the portfolio change, the volatility of the exchange rate derived from Covid-19, the change in methodology in the calculation of the fixed gas transportation charge by the supplier, the generalized decrease in the PML and the modifications to the Collective Bargaining Agreement among others, as shown below:

• Impact on income, caused by the exit of the Legacy Contract from the C.T. Francisco Pérez Ríos and the C.T. Valle de México in 2020. In 2019, 53% were generated through a Legacy Contract and 47% were generated by the MEM, and by 2020 37% and 63% were generated, respectively.
• An increase in the fixed charge for gas transportation reservation of 15%; which originated from the variation in the exchange rate derived from the health contingency caused by the SARS-CoV-2 virus (COVID-19); as well as the change of methodology by CFEnergía for charging for the use of the infrastructure.
• Financing costs were impacted by 1,030 million pesos (mp) mainly due to the volatility in the exchange rate caused by the health contingency caused by the SARSCoV-2 virus (COVID-19), going from 846 million pesos to 1,876 million pesos.
• In the spot market, there were 35% lower revenues from energy sales, mainly due to the 54% drop in the Local Marginal Price (PML) compared to the same period of the previous year.
• Impact on employee benefits of approximately 92%, from 1,945 million pesos in 2019 to 3,748 million pesos in 2020, mainly due to the modification of Clause 69 of the Collective Bargaining Agreement.