Mexico Opens Its Grid to Competition

As part of a wider reform of its energy market, Mexico is privatizing its energy regulator and will begin allowing private companies to sell energy to, and add capacity to, its electricity grid.  The country's president, Enrique Peña Nieto, enacted the laws (English summaries) on Monday, August 11th (Spanish pdf).  Petroleum and electricity have been state monopolies in law since the 1917 constitution and in practice since the late 1930s, when Mexico succeeded in expropriating foreign energy firms' holdings.

The change in direction is in part a response to very poor productivity: Mexican industrial customers pay around 72 percent more than American counterparts for electricity, according to a Deloitte report (pdf).  PriceWaterhouseCoopers estimates that the Mexican grid has 18 percent transmission losses, over double the OECD average of seven percent (pdf).

A 2005 IEA report on other countries' liberalization experiences calls grid liberalization "a long process rather than an event." Japan, which began liberalizing its electricity market in 1995, is now conducting its 5th reform. The European Union began in 1996, has decreed three reforms so far, and still has a long way to go. Oaxaca state congressman Juan José Moreno Sada, of the ruling Institutional Revolutionary Party (PRI) said last week at CIER that the culture of Mexico's regulators would have to change along with the laws to prevent corruption.

Another criticism of the new law is that it is too focused on fossil fuels, which accounted for almost a third of government revenues last year. At last week's meeting, Yesenia Nolasco Ramírez, a congresswoman from Oaxaca in the opposition Democratic Revolutionary Party (PRD), complained that the reforms don't offer enough support to clean energies. While a 2012 climate law establishes a goal of 35 percent of Mexican energy coming from renewable sources by 2024, it lacks sufficient enforcement mechanisms, she said, and this year's energy reform do not add them.

"From my point of view it's a step backwards," she said.

Mexico Opens Its Grid to Competition