Mexican congressmen seek consensus on power privatization

Mexican congressmen in the National Action Party (PAN) are trying to forge alliances with members of the Institutional Revolutionary Party (PRI) to privatize electric power generation, officials said Wednesday. The effort is an outgrowth of the change in Mexico�s political scene following the election of President Vicente Fox.


Sam Fletcher
Senior Writer


HOUSTON, Feb. 14�Mexican congressmen in the National Action Party (PAN) are trying to forge alliances with members of the Institutional Revolutionary Party (PRI) to privatize electric power generation, officials said Wednesday.

The effort is an outgrowth of the change in Mexico�s political scene following the election of President Vicente Fox.

Sen. Benjamin Gallegos said, �It�s under discussion now whether to change the constitution to remove restrictions.� Gallegos, the Senate's energy commission secretary, spoke at a Cambridge Energy Research Associates conference in Houston.

The focus is to open only electric power generation to outside investors, not electrical transportation and distribution systems, Gallegos said.

However, he said that unless Mexico can develop the natural gas supplies to fuel new power plants, no one will invest in power generation.

�As for upstream gas operations, the government is considering not submitting any changes until the electrical proposal goes to Congress and is passed. After that is when the government will be considering changing the rules and regulations and constitutional changes for the private sector to participate in the dry gas production,� said Rafael Alexandi, a member of the energy secretary�s office in Mexico.

Under Fox�s regime, some �traditional policies� about Mexico�s energy industry are being questioned, said Jose Luis Aburto, a former deputy energy minister who also is with the office of Mexico�s secretary of energy.

He said �several inconsistencies in Mexico�s energy policy� require changes.

Although Petroleos Mexicanos and the Federal Power Utility (CFE) have previously �fulfilled expectations to a large degree,� he said, they �now lack elements� necessary for Mexico�s energy growth, particularly in providing natural gas to fuel energy power plants. �In many ways they have become a burden,� said Aburto.

�In order to correct the limitations we have in Mexico, we need capital, technology and skills. The only way we�re going to be able to solve these problems in time to satisfy demand is to open up to private investment in a much more effective way than we have in the last decade,� he said.

With PRI in disarray following Fox�s victory, PAN congressmen are trying to swing some PRI members to vote for constitutional reforms. But the leftist Democratic Revolutionary Party (PRD) is using the California energy crisis as a scare tactic against privatization of Mexico�s power industry, said Gallegos.

Meanwhile, Mexico is looking at other fuels for future power plants, including nuclear power. During a trip to Europe, President Fox met with German businessmen who proposed building nuclear power plants in Mexico, Alexandi said.

Outside investors also are worried about uncertain power pricing policies in Mexico. One conference attendee complained that CFE is �an unfair competitor� because of its subsidies to consumers.

�You�re absolutely right. To have adequate rates is a prerequisite to any reform. Unless we face this problem first, we are in for big trouble,� said Aburto.

Sondra Scott, director of Latin American energy at CERA, said, �I�m sure they�re thinking about it, but the reality is that the plan is not complete,� said

However, Rogelio Gascar-Neri, a former head of CFE and now an energy consultant in Austin, Tex., said the large industry end-users for which outside generators will be competing will not be the beneficiaries of subsidies to CFE. There should be �a clear signal� in any reform legislation that there would be �room for new generators to compete,� he said.

�That is already in the plan,� said Gallegos.

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