Cost of electricity goes up following 20% increase in fuel
The adjustment has occurred after the government announced last December liberalization of gasoline in 2017 and amid protests across the country by rising prices and the impact on inflation because of deregulation.
The electricity tariffs for industrial, commercial and domestic high consumption will increase in January, the Federal Electricity Commission (CFE) of Mexico reported in a statement. CFE said that the increase will not affect low-power households.
The adjustment has occurred after the government announced last December liberalization of gasoline in 2017 and amid protests across the country by rising prices and the impact on inflation because of deregulation. The biggest increase is expected for the industry, between 3.7% and 4.5%. Businesses will pay between 2.6% and 3.5% more. Meanwhile, the increase for high-consumption households will be 2.6%.
CFE explained that the increase is due to rising price of fuel used to generate electricity. The cost of natural gas rose 77% in December 2016 compared to the same month in 2015. The price of imported coal increased by 72.8% in that period.
“The increase will have a major impact on high-end consumer residential customers who pay heavily, and for industrial consumers focused on the domestic market, although it remains a competitive dollar price for exporters,” said Duncan Wood, director the Mexico Institute of the Woodrow Wilson Center . The researcher points out that two variables will be key in determining the price of inputs and set electricity rates in the coming months: the exchange rate of the peso against the dollar and demand for natural gas in the United States during the winter.
Wood believes that the creation of an energy market is positive in the long run for the Mexican economy, but that the government was wrong to promise that the prices of the sector would remain stable, something that can not be guaranteed under free market conditions. “The fall in popularity of the president is evident and the opposition has been strengthened after these measures,” he adds.