A curious case is represented, in the Mexican electric sector, by the Independent Energy Producers (PIE). They are private companies that generate energy on behalf and account of CFE as a form of maquila, authorized in the 1992 reform of the Public Electric Energy Service Law, and as a way to allow private participation in generation without precisely violating the public service.

Despite the fact that CFE designed the international bidding bases, established the purchase terms, the minimum operating characteristics, the guaranteed capacity and the energy they had to deliver, the guarantees they should present and, in some cases, selected the sites and even committed itself to bringing the gas to avoid integrated costs, they are disowned as if they were illegitimate children.

“…they are considered illegitimate only because their assets are privately owned.”

The absurdity. “That energy is not CFE’s,” the arguments put forward by the current directors of the company are heard, like saying that the trip in a taxi or Uber is not yours because it is not your automobile. Or, in more energy-related terms, as if the oil extracted by a company with a service contract for PEMEX were not counted as part of the production of the Mexican oil company, only because the operators or the platforms are private.

In their eagerness to win the narrative, CFE directors have pointed out that this energy is not theirs and that CFE only produces 38% of the country’s generation, while the PIE produce 31%. Meanwhile, in this year’s Government Report, CFE recognizes that it controls 84% of the total energy commercialized.

This means that regardless of whether the owner of the plant is CFE or a private party, the energy that is produced belongs to CFE and it is the state company that commercializes said energy. If we add the 38% plus the 31% of the PIE, then CFE controls 69% of the energy; if to that we add another 4% from Long-Term Auctions, the percentage increases to 73%, and if we add other contracts with private companies, the figure reaches the mentioned 84%.

There are only 34 PIE permits and there cannot be more of this type because the model was cancelled starting with the energy reform, with the publication of the Electric Industry Law in 2014. Under the reform there are no different permits for the generation of electricity, but rather, with a generation permit, different purposes can be served.

Of the 34 permits, 28 are combined cycles that operate, mostly, with natural gas and 6 are wind farms located in Oaxaca. The 34 PIE represent altogether an installed capacity of 18 GW, of which 12 permits were granted between 1997 and 2000; 9 from 2001 to 2006; 7 from 2006 to 2012, and 6 after 2012 and until the entry into force of the Electric Industry Law.

Of the PIE, 5 of the 7 granted between 2006 and 2012 were wind farms, which implies that 5 of the 6 wind PIE were granted in said period. The total installed capacity of all of them adds up to 0.6 GW, so they represent less than 3% of the total capacity of the PIE, while the remaining 97% are combined cycles.

The PIE, in addition to being illegitimate unrecognized children, are accused of being leonine mainly because of that 3% of wind PIE. The argument is that they are very expensive for CFE and that the company loses money because of them, this on the basis of two references: the price of the wind farms from auctions and the price of CFE’s wind farms. The first is the lowest price that CFE pays for energy, in such a way that the weighted price of the wind PIE is almost 5 times higher than these.

The other reference point is the price of CFE’s wind farms, over which the PIE would be almost 3 times more expensive than CFE considering that it is the same technology. There is very little information in this regard on how the price of CFE’s wind farms is calculated, but we can explain the difference between the prices of the PIE and those of the long-term auctions.

So, does CFE have losses from operating these unrecognized children? Not really. Thanks to the reform, the different generation units of CFE were separated into subsidiaries. The subsidiary CFE Generation V is the one that exclusively manages all the PIE. That is, it is the legal representative of these plants before CENACE and makes the offers in their name, despite the fact that private parties operate them.

CFE Generation V, the representative of the PIE in the Wholesale Electricity Market, is the only CFE subsidiary dedicated to generation that has not had losses consistently in recent years. The other business unit with that characteristic is CFE Transmission.

That is, then, the story of the children not recognized by CFE who, although they are part of the energy it controls according to its offer function —in the terms established in its own bidding bases and contracts, and which represent profits for it— are considered illegitimate only because their assets are privately owned.

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This article was originally published by Energía a Debate.
Date: November 17, 2021
Link: https://energiaadebate.com/los-pie-hijos-ilegitimos-de-cfe/ [Online]

A curious trait of our society is that the powerful ideas of some authors remain marked by their name. Thus, we give the qualifier of Machiavellian to some action taken where the end justifies the condemnatory character of said action. In the same logic we can find other qualifiers such as Malthusian, Orwellian or Kafkaesque, and on that last one I will stop a little today to refer to the Mexican energy sector.

Yes, the Mexican energy sector in our days is, to say the least, Kafkaesque. The term is derived from Franz Kafka, an author born in Prague, known for his work The Metamorphosis, and is usually used in situations with oppressive, complex or illogical qualities, which for the author was exemplified with the soulless bureaucratic machinery of the Austro-Hungarian Empire. Are you beginning to imagine something?

Frederick Karl, Kafka’s biographer, gives us a better definition of the meaning of Kafkaesque. He says that a Kafkaesque situation is one in which you find yourself in a surreal world where all your patterns of control, all your plans, the complete way in which you have configured your own behavior begin to fall into pieces and you begin to fight against it with all your resources, with everything you have and, however, it is evident that you have no opportunity whatsoever.

That is Kafkaesque, whether it is turning into a beetle, as in The Metamorphosis, or facing the new configuration of the electric sector proposed by the initiative of constitutional reform in matters of electricity.

“If the reform is approved, we would enter a surreal world, perhaps unique in the world.”

The Kafkaesque nature of the matter cannot be denied. If the reform is approved, we would enter a surreal world, perhaps unique in the world. Where a public company becomes the only buyer of electricity and the only seller of electricity and where citizens have no options, where we enter into the soulless bureaucratic machinery, complex, illogical and oppressive.

As surreal as the above is the fact that said company self-regulates, creates the energy transition policy and is outside any of the controls of the federal public administration. Even more, in this surreal world, citizens and companies, we see how our patterns of control, our plans and our own behavior fall into pieces.

And it is that companies that have invested for years in the electric sector in designs, payments of permits and rights, expansions of the network, studies and construction of plants, which are carried out with a budget and a debt with national and international funds, will see how their plans fall into pieces.

Not only the inanimate components of the companies, but their employees, suppliers and the communities with which they have a relationship will be affected in a magnitude that it is still not possible for us to imagine in its fair dimension, those who make up millions of Mexican families who will see their ways of life affected.

What to say about those families that invested their savings to install solar panels on their roofs to reduce their consumption? They will see the models of consideration contracts modified with a stroke of the pen, absorbed within the complex structure of a State organism.

And yes, although there have been efforts of struggle through debates, positions and amparos before the constant onslaught, before a constitutional change it will be evident that citizens, families and companies will have no opportunity whatsoever. We will remain under the shelter of a superstructure called CFE. That, friends, is Kafkaesque.

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This article was originally published by Energía a Debate.
Date: October 25, 2021
Link: https://energiaadebate.com/una-reforma-electrica-kafkiana/ [Online]