Mexico Weighs Wide-Ranging Reforms to Energy Giants Pemex, CFE

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--Mexican President Claudia Sheinbaum sent to Congress a bill that aims to strengthen and support the Federal Electricity Commission (CFE) and Petroleos Mexicanos SA de CV (Pemex) (Mexico City). This reform rolls back the 2013 energy reforms aimed at attracting private investment to the Mexican energy sector.

The proposed changes would eliminate CFE and Pemex subsidiaries and vertically integrate the companies. According to the Energy Minister Luz Elena Gonzalez, Pemex has three subsidiaries and almost 50 more companies in which it has some participation, while the CFE has nine subsidiaries and another four in which it holds stakes.

Additionally, the proposal grants the CFE at least 54% of the national grid's power generation supply and promises to maintain electricity prices below the inflation rate.

However, private companies will be able to produce electricity under six schemes. Three schemes involve self-consumption and production of electricity for as much as 20 MW.

For the national electricity market, private companies also could generate electricity through long-term contracts exclusively sold to the CFE, or create a joint venture with the CFE in which the national state company will own at least 54% of the stakes. The wholesale electricity market would remain unchanged.

During her presentation, Gonzalez said the CFE foresees investments of US$23.4 billion between 2024 and 2030, including the construction of 13 gigawatts (GW) of new capacity.

Under this new regime, Pemex will be given priority to select energy blocks to be auctioned. Additionally, private energy companies can form joint ventures with Pemex or supply it with services.

The bill also foresees a tax reduction for Pemex, a policy aimed at shielding the company financially. Under the previous government, Pemex received tax reductions or waivers on several occasions to help it cope financially.

The reform includes the creation of a new energy regulatory authority in charge of overseeing the sector and issuing permits.

The energy bill was sent to the Mexican Congress on Wednesday, January 29, where it will be discussed. Morena, the government's party, holds a majority in the Mexican Congress, which makes it easier for Sheinbaum to implement policy.

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