C&I Customers Are Embracing Qualified Supply and its Benefits, Are You?
Since 2016, the Mexico energy market has continued to evolve despite the various challenges thrown at it from the government, customers, investment community and suppliers. Regardless, two distinct elements have proven consistent throughout:
– The willingness of market participants to adapt to market conditions and
– The interest of end users to seek competitive supply
These two factors have led the electricity market to become a very dynamic environment with many opportunities and benefits for both end users and suppliers.
While these two factors are important, there is one statistic that underpins Mexico’s growing energy market, and that is the record number of companies that have registered as Qualified Users since the inception of deregulation. What is a Qualified User? It is a business with a demand of at least 1MW of energy and that registered with the CRE to participate in the MEM through a Qualified Supplier. Recent data shows that from 2016 to 2017 the number of registrations nearly doubled. This is important, since it reflects that companies more fully understand the benefits and risk associated to Qualified Supply.
Today, many of those same companies have started to enjoy significant savings, better reliability, an energy supply more adequate to their needs, and a competitive advantage when it comes to the bottom-line. Sometimes, being a first mover may not yield substantial benefits, but for many of these organizations, they have enjoyed sizable savings over their CFE rates.
Some say the number of Qualified Users is modest compared to the amount of end users who could become Qualified Users, but the numbers continue to increase, which is great for C&I customers and suppliers.
In 2018, we saw an additional 61% growth and in 2019, an additional increase of 75% when it came to new registrations for Qualified Users. These again, are all positive indicators that companies are beginning to embrace the opportunities presented by an open market to reduce costs, improve reliability and mitigate risks. To date, the winners are the end users and those who actively seek new ways to reduce costs and better understand their energy risks.
Understanding energy risks is a critical component of energy procurement, since companies may face volatile factors such as commodity prices and consumption that could have an impact on costs. These factors need to be analyzed in depth and put in the context of market conditions and trends as well as their potential budget implications. Companies can acquire intimate knowledge of their energy risks with the help of a trusted advisor who can also facilitate the transition process of switching electricity suppliers. An additional benefit of hiring an advisor is that they can help navigate the Qualified User registration process and any other regulatory requirements.
The more organizations learn about managing their energy under the current energy reform, combined with the push by Qualified Suppliers to remain competitive and relevant is translating into additional savings for end users. The reason for this increase is due in large part to suppliers learning how to manage certain risks such as congestion and reducing their margins.
In conclusion, the Energy Reform established a few years back is starting to resonate among end users with high-energy consumption. This is a good sign for all market participants, especially if you have been sitting on the sideline waiting to get in the game. Our counsel would be to explore your options and actively consider seeking alternative supply from CFE and benefit from the recent options to reduce your costs, improve reliability and grow your bottom line.