Tracking the Progress of Mexico’s Power Sector Reform
Mexico’s 2013 landmark energy reform is overhauling the country’s electricity industry by allowing private investment throughout the energy value chain.
The changes in the energy markets represent a paradigm shift. The power sector is transitioning from a vertically integrated industry with a dominant state-owned utility to a decentralized market open to both public and private companies. The reform is comprehensive and imposes significant changes throughout the electricity supply chain: power generation is set to become a fully competitive activity; an independent system operator will run a wholesale electricity market; and open access to the power grid will be guaranteed to all market participants.
The power sector reform also means a more proactive role for government agencies and regulators. The Mexican government will oversee the industry’s transformation, promote competition, and enforce transparency measures. Furthermore, Comisión Federal de Electricidad (CFE) –the incumbent utility– will unbundle and compete on equal terms with incoming private companies. To help CFE compete, the reform has granted the utility greater operating flexibility, and CFE will be able to partner with the private sector through joint ventures and bilateral agreements in order to optimize its investment strategy.
Mexico’s electricity sector will become increasingly complex. Over the next ten years, new companies will enter the market; wholesale transactions will increase sharply; and industry growth will accelerate. This report tracks the progress of the transformations taking place along the electricity supply chain and describes the next steps in the reform process.
About the Author
The Mexico Institute seeks to improve understanding, communication, and cooperation between Mexico and the United States by promoting original research, encouraging public discussion, and proposing policy options for enhancing the bilateral relationship. A binational Advisory Board, chaired by Luis Téllez and Earl Anthony Wayne, oversees the work of the Mexico Institute. Read more