An unprecedented reform of Mexico's power sector is well underway. By next month, the country will begin authorizing new contract models for implementing the 2014 electricity sector reform.
Failure to implement the reform would put the country at a severe disadvantage in several decades. High demand for manufactured goods in the neighboring United States has spurred a Mexican manufacturing boom, which has in turn increased electricity demand. Medium and large industries consume around 58 percent of total electricity sold. The heavily subsidized residential sector, which accounts for around 25 percent of total electricity use nationwide, drives demand even higher, as do rising population growth and urbanization.
Mexico has few large rivers it can use to generate low-cost electricity with hydroelectric dams, so it has typically relied on more expensive (and often imported) refined petroleum products to meet power demand. Since 2000, imports of natural gas, mostly from the United States, have supplanted some of the more expensive inputs such as fuel oil. Some industrial electricity prices in Mexico have fallen by more than 30 percent since last year because of declines in the price of oil and natural gas.
