News, Insights and Best Practices for Manufacturing in Mexico

Industrial Electricity and Utility Rates in Mexico

   
30 Jan 2017

Category: Logistics Management, Politics & Regulations

Manufacturing utilities in Mexico, specifically electricity and water rates, are calculated to comply with market fluctuation and environmental agreements. The recent implementation of an energy reform opens Mexico’s energy sector to the private market and may result in changes to utility rates in the future. Currently, accessing some utilities in Mexico relies on the availability of the resource per person and distributed accordingly.


Water Utilities

Water utility rates for Mexican manufacturing plants is calculated based on consumption per cubic meter and, depending on the area, a percentage for sewer usage can be charged. For example, there is a 25% charge of the water bill that goes to sewer usage in Saltillo. In addition to these calculations, special water usage are charged as added fees. Ottosen states, “if you are working with heavy metals or contaminants that could leak into the water system, you will have to pay a surcharge based on the volume and water used.” According to Mexconnect.com, Mexico consumes the least amount of water in North America, and only about 10% of that water is used for industry production. Along with water consumption, gas is also paid per cubic meter and is measured in joules or calories.


Electricity Rates for Manufacturing in Mexico

In Mexico, the Comision Federal de Electricidad (CFE) regulates all electricity through their power purchase arrangements set up with private producers. Electricity is charged per kilowatt, and fluctuates during specified rate times of the day. In July 2016, the average price for a plant in Queretaro was about $2.7 MDP per kilowatt. The demand changes every month to reflect peak electricity usage, reduction taxes, and overall rates from the previous month within a specific region.

Client development manager for The Offshore Group in Queretaro, Leonard Ottosen noted how the price of electricity in a manufacturing plant varies based on region, and is charged by energy demand and power factor. Power factors are calculated on a base rate, intermediate rate, and peak rate during specific times throughout the day, and reflect the regional demand.


Rates are calculated during these hours:

Base Rate

Nightly: 12am - 6am

Intermediate Rate

Summer: 6am - 8pm and 10pm - 12am

Winter: 6am - 6pm and 10pm - 12am

Peak Rate

Summer: 8pm - 10pm

Winter: 6pm - 10pm



Mexican Energy Reform

The government monopoly on energy will slightly begin to change throughout 2017 because the Mexican energy reform of 2013 was recently enforced at the end of 2016. The reform is said to raise the use of solar power and green energy producers to stay in compliance with global ecological agreements. According to Leticia Martinez, a Client Development Manager for the Offshore Group in Sonora, “Mexico generates 75 percent of its electricity from fossil fuels, 19 percent from geothermal, hydro and wind sources. The rest is spread among nuclear and other sources.” The reform increased the participation of private companies in the Mexican energy industry, and looks to expand the electrical infrastructure.

The implementation of the Mexican Energy Reform will take on a new pricing model sometime in 2017. The energy pricing will go through a process of reviewing international oil prices, adding on refinement, including transportation and storage, putting the power within a commercial margin, adding taxes, and pricing it to an exchange rate. This process mirrors how the pricing of oil will be calculated under the new deregulated gasoline market. The energy reform is still in its early stages where some items are yet to be taken into account. Ottosen believes the energy reform will affect utility consumption and pricing for manufacturers, but is still unclear as to when we’ll see the repercussions.

Electricity pricing model Mexico

Electricity pricing model - Enerlogix Solutions


Managing an operation in Mexico requires a lot of overhead logistics to consider. Understanding how electricity and water are distributed and calculated is just the start to being in full control of manufacturing in Mexico. The effects of the energy reform are still waiting to be seen around the country, with the hopes of providing stability and market competitiveness.

 

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