Risk in the electricity sector due to regulation

MEXICO CITY. The regulatory changes that have been registered in energy matters increase the risk for the development of the electricity sector, as it has impacted new investments, Moody's Investors Service indicated. "The current government has shown considerable willingness to intervene in regulatory matters, deterring private investment in the process", according to the report "The risk of government interference in the electricity sector in Latin America".

"Access to new renewable energy remains limited, and Mexico deviates from its long-term sustainable goals." "Government interference translates into the regulator denying or delaying new generation permits for private sponsors, deterring private investment and causing a delay in investment in renewable generation." Moody's noted that the CFE maintains significant power because of its relationship with the state, which may further jeopardize the stability of private operators already participating in the market.

Notwithstanding the instability generated by regulatory changes, it added, the judicial system has been solid, with judges overturning some of the strongest cases of government interference. It also noted that the utility is now more dependent on financial support from the current administration, as subsidies have been increasing in order to cover variable costs such as fuel prices.

Changes The electric sector has suffered multiple regulatory changes during the last six years that have affected its development: -Cancellation of transmission lines from Oaxaca to the center of the country and from Sonora to Baja California -Cancellation of electric auctions -Change in the accounting of clean energy certificates -Cenace reliability agreement -Sener's reliability policy -Reform to the Electric Industry Law -Constitutional reform in energy -Constitutional reform in energy.