Energy counter-reform and non-viability of the CFE

As usual, the government lies about the electricity sector. It is false that the rectory of the State has been lost, and that the CFE has been weakened and exhausted with the Energy Reform of 2013-2014. It is with the present administration that the CFE has received lethal blows that question its financial and operational viability. The 2013-2014 Energy Reform ended the CFE’s monopoly in the electricity generation and supply businesses, and kept it in transmission and distribution.

The State retained control of the transmission and distribution network and electricity dispatch, as well as the electricity market, through Cenace, and the regulation of the system, through the CRE. It was also possible for the CFE to leave behind losses and obtain profits for the first time between 2016 and 2019, thanks to lower energy costs, a new tax regime, its entry into new markets, and a new pension regime.

As El Economista has pointed out, from 2016 to 2019 the CFE earned 251,000 million pesos net, while between 2012 and 2015 it recorded total losses of 187,000 million pesos, according to the financial statements of the company reported to the public. The negative net results returned in 2020 with the current government, and will be repeated in 2021.

In fact, in 2020, CFE observed a net loss after taxes of 85,996 million pesos. It is worth reviewing the reasons for the financial success of the CFE between 2015 and 2019. First; Competition in generation drove out of the market the obsolete, expensive and polluting electricity generation (based on fuel oil, diesel, natural gas) of the CFE itself, which, although it reduced the income of the CFE GeneraciĆ³n subsidiaries, significantly improved the overall results of the company.

Private generation companies, competition and clean energies made it possible to significantly reduce the cost of the entire electrical system, which implied a benefit for the CFE’s commercialization business, since the prices at which it acquires energy for its use were lowered. sale to its basic and qualified supply affiliates.

It is well known and documented that both the average variable cost and the average total cost (variable and fixed costs) of the electricity produced in the CFE plants is much higher than the Independent Energy Producers and even more so, the private power plants of clean energy auction – up to 90 percent. (By the way, the auctions were canceled by this government).

Second; With the Energy Reform of 2013-2014, the subsidies for domestic users of low consumption or basic consumption were made explicit, so that from 2016 to 2020, the company received an average of 64,000 million pesos per year from the government to cover them, which in addition to pay for transparency, strengthened the company’s income. Third; With the 2013-2014 Energy Reform, a new tax regime was obtained for CFE as a consequence of the change in its legal nature, when it became a State Productive Company.

With this, it stopped paying utilities to the federal government (58,000 million pesos in 2014), and became a cause under the same conditions as private companies. Room; CFE diversified and strengthened its sources of income, by entering the market for the commercialization of fuels (natural gas) through its network of pipelines.

Between 2016 and 2020, this business generated revenues for CFE of 126,000 million pesos. Fifth; A new pension scheme was achieved in 2016 that increased the retirement age for men from 30 to 40 years of service, which considerably reduced the cost of the company’s labor obligations. The current government, in a corrupt, patronizing and irresponsible way, has returned to the previous retirement regime.

With the energy counter-reform, the CFE would once again become a monopoly and monopsony, it could not replace the private investment in power generation that would be required to satisfy a growing electricity demand in the next decade (1.4 trillion pesos are estimated), nor to advance in the transition towards clean energies and the de-carbonization of the electricity sector (840,000 million pesos are estimated). Neither does the CFE have the capacity to do so.

It could not even reach 54% of the generation as the Counter-Reformation whimsically wants. It would entail a crisis in the energy supply, less competitiveness and growth, and a gigantic gap in public finances, with the known macroeconomic consequences (deficit, public debt); and higher generation costs would result in higher rates or astronomical subsidies.


Gabriel Quadri de la Torre

Civil Engineer and Economist

Green Seriously

Politician, liberal environmentalist and Mexican researcher, he has served as a public official and activist in the private sector. He was a candidate of the Nueva Alianza party for President of Mexico in the 2012 elections.

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