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Mexico’s Wholesale Electricity Market is Defined. Will it work?

by Jed Bailey | September 28, 2015 [wpdm_package id=1270 template=”link-template-button.php”]

On September 8, 2015, SENER published the final version of the Electricity Market Bases in Mexico’s Federal Register, just over six months after the first draft was unveiled for public comment (see Energy Narrative’s March, 2015 report Mexico’s Proposed Wholesale Electricity Market Bases: The Next Step in a Long Road). During the comment period, the Federal Commission for Regulatory Improvement (Cofemer in Spanish) received more than 30 written comments, and officials from SENER heard from myriad representatives of industry associations, private companies, consultants, academics, and other stakeholders through public forums and private meetings.

While the revised final Bases address some of the concerns voiced during the public review period, they do not resolve them all. Many critical details remain to be defined in the supporting documents that will follow. This report provides Energy Narrative’s initial observations on the final Bases, highlighting the changes that were made from the initial draft and the broader implications for Mexico’s electricity sector.

Implications for market participants. Market participants should treat the new market with caution. The market frame-work is increasingly coming into focus, but the remaining details will still influence companies’ strategic choices and tactical decisions.
What was changed? The final Bases provide additional clarity and detail around many of the original market concepts, adds a number of new components, and delays some components that were originally envisioned for the first phase.
Revised Timeline: Although the final Bases were delayed for several months from the original proposed schedule, the new market continues to be developed at an unprecedented pace.
Will it work? Mexico’s new power sector structure’s success or failure will ultimately be judged by its ability to consistently deliver electricity at the lowest sustainable price.
What Should Participants Do? Despite the remaining implementation challenges, the new markets certainly offer more—and more varied—opportunities that the previous regime.
Next Steps: Mexico’s new electricity sector is rapidly moving from design to implementation and operations. While many details remain to be clarified, current and potential market participants should begin to prepare.

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