Industrial Electricity and Utility Rates in Mexico
January 30, 2017
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 utility rates for Mexican manufacturing plants are 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 electricity price for a plant in Queretaro was about $153,480 USD with a 17.6 exchange rate. 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:
Nightly: 12am - 6am
Summer: 6am - 8pm and 10pm - 12am
Winter: 6am - 6pm and 10pm - 12am
Summer: 8pm - 10pm
Winter: 6pm - 10pm
Mexican Energy Reform
The government monopoly on energy began to change throughout 2017 because the Mexican energy reform of 2013 was 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 was 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 - 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.
Start your journey into Mexico today!
50+ Questions to ask before expanding into Mexico
Thinking about expanding into Mexico? Step 1 of your due diligence process is answering all of these questions. Over the last 33 years, thousands of companies have used this guide to accelerate their expansion into Mexico.
Get The Tetakawi Insights Newsletter
Sign up and stay informed with tips, updates, and best practices for manufacturing in Mexico.