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