By Aldo David Acevedo P.
On the 11th of May 1995, reforms to the Regulatory Law of Article 27 of the Constitution in the Area of Petroleum were published in the Federal Official Gazette. These reforms empowered the Government to grant permits for distribution, transport and storage of natural gas, as well as to sell this resource first hand.
In parallel with these reforms arose the need to create a regulatory body for this energy sector. It was then that the Energy Regulatory Commission (or CRE) was created as a decentralized body of the Ministry of Energy.
Among the many duties that the CRE currently has, one such is to divide Mexico into strategic geographical zones for the storage, transport and, primarily, distribution of natural gas. Since 1997, the CRE has set about the task of inviting bids for the distribution of natural gas throughout the different geographical zones into which the Nation had been divided, for example: Monterrey, Federal District, La Laguna-Durango, Valle de Cuautitlan-Texcoco, Guadalajara, Toluca, amongst others.
It is worth pointing out that in each of these geographical zones existed a deficient distribution system, mainly in the industrial sector, previously run by PEMEX. These were passed over to the companies that bid when they acquired their Permission to Distribute Certificates for each zone, as in the case with Natural Gas Mexico, Tractebel, Sempra Energy, Metrogas, Mexigas, amongst others.
In addition to the powers we talked about in relation to the Permission to Distribute Certificates, the CRE, based on Chapter VIII of the Natural Gas Regulations, also has the power to grant so-called Self-Supply Permits. These permits give private companies the power to be supplied this resource directly, independent to the company that won the bid in that particular zone provided that their consumption falls within the range established by these regulations. In other words, the sale of natural gas to these Self-Supply Companies is done directly without going through the company that won the bid.
To this effect, Self-Supply Companies may acquire of build a gas pipeline to their plants under the indications of the CRE, which satisfies security obligations placed on them by these Regulations, but without being subject to the obligations that legitimate suppliers must meet.
Natural Gas Self-Supply Companies consist of a group of industries and/or merchants that combine their consumption in order to obtain a self-supply certificate through a commercial company of this nature determined by a specific number of users or consumers (clients), which, as we have already mentioned, must meet a minimum consumption quota to be granted this permit.
The creation of these companies can be justified in light of the lack of supply and exploitation of underground deposits that provide for and maintain an efficient level of natural gas production throughout the Nation, but this must take place only in areas where there is no licensed Distributor. What’s more is that currently, the geographical zones with permits for the distribution of natural gas are insufficient, mainly in those industrial regions with high indices of consumption.
Nevertheless, I consider that this last idea if implemented would only be adequate enough to deal with atypical situations or those geographical zones that have not been studied, analyzed and determined by the CRE, but not just in a manner that meets the formal requirements; they must visit the countryside and meet the applicants since it is disgraceful and destructive that the CRE grants Licenses to these Self-Supply Companies or industrial parks or commercial regions located within a geographical zone whose distribution permit has been legally granted to a distributor as a result of a bidding process governed by a strict regulatory framework with respect to general conditions, tariffs, revisions, warranties and all other necessary elements to be able to operate and maintain a distribution network in one of the zones that was put out to tender by the CRE.
In light of this, from an analysis of the requirements that must be met in order to win a bidding process and be awarded a distribution license and those that a self-supply company must satisfy, I consider it disadvantageous and inequitable that the CRE authorizes the creation of Self-Supply Companies within geographical zones that have already been put out to tender. This is mainly due to the fact that the requirements in the first case are much more complex than in the second.
I believe that the creation of Self-Supply Companies represents a betrayal of the trust placed in the hands of distributors and a trespass on their investment, which is already under threat from the infamous five-year guarantee.
Another aspect that springs to mind and also causes me a feeling of unfairness is that no reliable verification is carried out of the applicants that wish to join a Self-Supply Company, which, more often than not, take advantage of opportunists who dedicate themselves to collecting supposed partners who in reality are really just clients; a simple application letter adhering to the Self-Supply Company is enough to be able to connect to their network, which enormously affects the Licensed Distributor in the geographical zone. There are cases where in the same industrial park there is a distribution network constructed by the Distributor and another built later by a Self-Supply Company, which we have seen in the zone of La Laguna-Durango.
