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Mexico Competition Commission Warns Of Higher Electricity Rates

 |  May 24, 2020

Mexico’s Federal Economic Competition Commission (Cofece) has warned that electricity rates could go up as a result of measures that will delay the commencement of new renewable energy projects and ramp up production at old state-run power plants.

The National Energy Control Center (Cenace) published an agreement last week that suspended trials that allowed wind farms and solar parks to provide electricity for the national grid. The decision will cause delays to 28 new wind and solar projects because they can’t begin selling electricity to the Federal Electricity Commission (CFE) until they have completed the trials.

Cenace also stated that fuel oil produced by Pemex as part of the oil refining process will be used to ramp up power generation at old CFE plants in order to “to improve the reliability of the electricity system” during the coronavirus pandemic.

The competition commission said in a statement that it had advised the federal Energy Ministry, the Energy Regulatory Commission and the National Energy Control Center that the Cenace agreement could lead to higher power prices and force the federal government to increase electricity subsidies.

Private energy companies including those that operate renewable projects sell electricity to the CFE at prices that are much lower than it costs the state-run commission to generate it itself. Therefore, the greater the quantity of power the CFE supplies to the national grid itself, the higher electricity rates will be.

Cofece also stated that the Cenace decision that delays the entry into operation of new renewable energy projects could be in violation of competition rules and generates investment uncertainty.

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