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agosto 17, 2019
English Especiales Fluvio Ruiz Oil & Gas

An outline of sectorial budget regulation

Column: Fluvio Ruiz Alarcón

The structure of public expense depends on the ideological orientation underlying those who define public policies. In Mexico, during the last few years, greater spaces have been opened up for private capital in the energy sector, both for political and ideological reasons. The arrival of the new government supposes a reorientation in the public policies of the sector, tending to give a greater protagonism to the State and its institutions. One of these is the Energy Regulatory Commission (CRE).

The CRE, as recognized in the Federation’s own 2019 Expenditure Budget, “is responsible for the regulation, granting of permits and supervision of hydrocarbon activities for the storage, transportation and pipeline distribution of oil, gas, petroleum products and petrochemicals. Also, the access of third parties to the transportation and storage pipelines of hydrocarbons and their derivatives; as well as the regulation of firsthand sales of such products and in electricity for the generation and establishment of portage tariffs for transmission and distribution. In addition to the supervision of the operation of the Mexican Electric Market by CENACE”.

In fact, the CRE has emitted more than 22,600 permits related to petroleum products and petrochemicals, commercialization and open access to transport by a natural gas pipelines, generation permits and electric supply, transmission rates and electrical energy distribution, as well as the registration of qualified users.

However, despite its greater relevance as an instrument of the State to regulate the activity of private capital in the collective interest and the ideological perspective of the new government, its budget for this year was cut by just over 28% compared to 2018. This has led to a sharp reduction in personnel, which could reach, in the extreme, more than 60%.

Since the new administration, the CRE has been criticized for being too aggressive against Pemex since the enactment of the secondary legislation on energy reform. With nuances, I myself have shared this questioning, especially when the CRE has issued resolutions that contravene one of the principles established by Scott Hempling, considered to be one of the greatest theoreticians of regulation, and who maintains that the establishment of free market conditions, at all costs, cannot be seen as the most unique reason of being of regulatory bodies. The stubbornness of the CRE in advancing and flexibilizing the —until now non-existent— free market of gasoline is an example.

Nevertheless, these postures against the CRE were in line —as established by Law— with the energy policy of the former administration. Therefore, what is required for the shift in the orientation of this policy is a strong regulatory body, technically, legally and politically speaking. Otherwise, in the space of its responsibility, where legal changes that reverse what was established by the energy reform are not foreseen, the CRE could end up being a simple administrative shell, incapable of being an effective support for the energy policy of the new government… for the benefit of private interests.

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