The secondary legislation of the energy reform has begun its final stage with the presentation of the fourth and last package of energy legislation, which deals with the sector’s regulation entities. The initiative of the Law of Energy Regulatory Coordination Bodies as well as the reforms made to the Organic Law of Public Federal Administration have the purpose of strengthening the regulatory entities by providing them with autonomy without losing coordination amongst government authorities. Nevertheless, the goals sought by the legislators that wrote these initiatives may not be attainable due to the content of the bills, which is more focused on generating the largest possible amount of resources for public finances rather than implementing an effective competition within the sector using an efficient regulation.
The proposed initiative has enabled new powers to the regulating bodies of the sector, the National Hydrocarbons Commission (CNH) and the Energy Regulation Commission (CRE), including their own legal personality, or in other words, autonomy from the Secretariat of Energy (Sener). However, they are still bounded to the Executive Power though the Coordinative Council of the Energy Sector and, although the latter will be presided by the Secretary of Energy – and will have several public officers from the federal administration – the full autonomy of these regulating entities cannot be fully perceived given the fact that they will have to adjust themselves to the current government’s position on the matter. A law that may be perceived as too close to the government may be unattractive for potential investors (whose main criteria is based more on the strength of the regulation entity compared to the government rather than the rules themselves) if the Executive Power has companies that may gain some sort of benefit. The way in which the government has appointed itself as the sole proprietor of PEMEX within PEMEX’s Law, as well as its omnipresence within many parts of the sector – Sener’s contracts for hydrocarbon exploitation, the allocation of resources from the Mexican Oil Fund for the Secretariat of Public Finance’s Budget – sends a wrong message to the rest of competitors. In addition, the appointment of the regulating entities’ commissioners – carried out by the President and endorsed by Congress – is subject to political criteria, thereby casting doubt over the autonomy of the aforementioned bodies.
The regulating laws had the same result as the rest of the secondary legislation on the matter: more competition in the sector but a substantial lack of the most controversial issues. On one hand, oil exploitation was permitted for all companies but PEMEX’s labor liabilities within a decreasing production rate were not addressed at all. On the other hand, the basis for a competitive electric market was set but small consumers were restricted to it due to the fear of the political cost that implies eliminating the large subsidy. With such contradictions, the real purpose of the federal government with this energy reform remains unknown. A regulation that seeks an enhanced economic growth is different than one that seeks more control or budget from the government. Even more so, it is not clear that the federal government has a vision of development for the energy industry – oil, gas and electricity alike – which has turned it into a vulnerable stakeholder within the legislative process.
The proposed regulation falls short of the mark: it does not fully liberate the regulating entities from the Executive Power’s intervention, thereby it makes attaining the promised benefits. For instance, the energy liberalization processes worldwide – and especially within Latin America – have made clear that countries where electric industry was privatized without a quality regulatory framework have not been able to reduce electricity prices in real terms or prevent power losses. Regardless of the government’s position, if the regulation is consistent with its targets and the latter do not seek economic growth, it is likely that the reform will not be sufficient. What is most surprising about this whole process is an ostensible ignorance on the matter.
CIDAC
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