Program on Energy and Sustainable Development Working Paper #5
This chapter aims to explain the motivations and strategies for reform in the Mexican electricity sector. Our focus is on the effects of politically organized interests, such as unions and parties, on the process of reform. We show how particular forms of institutions-notably, the state-owned enterprises (SOEs) within the power sector as well as the state firm that supplies most fuels for electricity generation-shape the possibilities and pace of reform. The tight integration of these SOEs with the political elite, opaque systems for cost accounting, and various schemes for siphoning state resources explain why these institutions have survived and the actual progress of reform has been so slow. Where private investors have been allowed into the market it has been only at the margin through the "independent power producer (IPP)" scheme, an oxymoron since the purchase agreements and dispatch rules that determine payment to these IPPs are dominated by the State.