What You Need to Know About Energy Deregulation in Mexico
Energy Deregulation Questions
What is the current duration of an electricity plan?
You may choose from a variety of options between suppliers, which may range for 1 to 5 to 10 years. We recommend not contracting for longer than 5 years because the market will change rapidly in the next few years.
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How can I get pricing transparency when analyzing supplier offers?
The only way is to have each offer modeled on your specific usage. Working with a consultant is the best option to get full transparency of plans.
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How long does it take to receive power from a qualified supplier?
The time from when you sign a contract until you receive power is generally 6 to 12 months, due to a time-consuming meter installation and registration process.
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Can I pay a fixed price for energy?
A high percentage of the energy you use in Mexico can be at a fixed price. There is currently no mechanism for your entire usage to be at a fixed price, although you should be able to guarantee the price for 96-98% of your load.
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Do I need an energy attorney?
The are two parts to the energy contracting process. One, understanding the market options—both prices and structures of supplier plans—which is a commercial transaction and requires someone who understands the market (like a consultant). Two, there is the legal side of the contract—the terms and conditions—for which we do recommend having an energy attorney.
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Should I have my supplier pay my broker or consultant?
Yes, this can work well for you, provided that you completely understand all of the costs and fees that are included in your bill. You should note that suppliers generally prefer not to work with brokers because of the high fees they include. They are much more willing to price through consultants.
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What are the real costs of a broker?
Brokers require suppliers to add fees that are far above the profits a supplier makes on the plan. These are calculated as fees per kilowatt-hour. Fees will vary by supplier. Consultants, on the other hand, work for a flat fee that is competitive in the market and based on lowering your costs from CFE.
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To achieve the best value for my company, what are the key factors my energy manager should understand?
Start with the load profile: how your plants and buildings are using energy and when. Next, understand the plan from a supplier and what that means for your bill. The energy manager needs to understand the budget for the next 12 months with CFE versus with new suppliers. The CFE cost is a tariff, while supplier costs are from the market.
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What options are available to me in the market besides Acclaim?
There are other consultants in Mexico who believe they can help you make a successful power purchase, and many have first-hand knowledge of CFE or Iberdrola. There are also some other consultants from the US who are learning the market.
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Does Mexico have a standard energy contract?
As deregulation moves forward, there will be many different options and ways to buy energy. There is not yet a clearly defined way to best purchase energy. Over time, a small number of products should become favored by customers.
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Does the price of energy fluctuate constantly?
The price of energy is the result of a number of commodities that are all moving at varying speeds. The most volatile piece of the cost of energy is natural gas. So, the price of electricity does move constantly and is continually priced at 15-minute intervals—until you sign a contract for a fixed price.
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What critical questions should I ask a broker or consultant selling me energy?
First, neither of these actually sells you energy; rather, they communicate the financial implications of a purchase. Brokers work for suppliers, while consultants work for you. The consultant’s job is to educate you on all the factors included in market offers.
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What critical questions should I ask a new supplier?
Ensure you completely understand what is included in the offer to
sell you electricity. This includes what the supplier is charging you
for capacity and how much is guaranteed; how much of your power is
guaranteed; what if any additional
pass-through costs are included in the price; and how natural gas
plays a role in how your contract is structured.
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What are the new meter and communications requirements when I switch to a new supplier?
You will need a smart meter approved by CFE, which will constantly communicate energy usage from the meter to CFE.
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Can I aggregate facilities?
Yes, you can aggregate facilities under one contract if they are owned by a single entity. It may be necessary to aggregate to reach 1 MW of total demand, which is the minimum size necessary to participate in the new deregulated market.
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What are the advantages / disadvantages of switching to a new supplier?
The biggest advantage is that you can reduce your electricity cost by switching to a new supplier. The disadvantages are the uncertainty of a new company and the plan that supplier delivers. These risks can be mitigated by working with the right energy consultant.
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What risks does a business face when buying directly from a supplier?
First, make sure you fully understand all of the charges and the total monthly cost for the new supplier. Next, make sure the supplier is financially strong and delivers accurate billing. Finally, make sure the supplier delivers every service they tell you they will deliver.
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How much money can I save if I switch to a new supplier?
You can expect to save between 10% and 15% with a new supplier in Mexico. However, we have been able to obtain as much as 40% for our clients. It will vary by where you are and what type of power load your company has.
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What will change when I switch to my new supplier?
You will simply be getting a new bill from another company besides CFE. Reliability and power quality will stay the same, and CFE will still deliver your power.
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Will CFE be my backup supplier if I switch? Will I also receive an invoice from CFE?
CFE will continue to deliver your power supply. Depending on your plan, you may still receive an invoice from CFE as well as your new power company.
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What are the primary things I should be aware of before I switch to a new supplier?
It is important to understand all the options in the market—not only the various suppliers that are available, but also the different ways to contract for power—to ensure you’re making the best decision for your company’s specific needs.
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What is the difference between brokers and energy consultants?
Brokers sell you power, but are working for the suppliers. The supplier costs include broker fees, which are not disclosed to you. Energy consultants, on the other hand, provide you with all the options for buying power at the prices that energy companies sell it for without any hidden fees. The consultant is aligned with the customer rather than with the supplier.
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How much will it cost me to switch to a new supplier?
There are no direct costs for switching from CFE to a new supplier. However, you will be required to install new meters to properly measure the amount of power being consumed in the new contract, so there are costs for that process.
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Should I evaluate my options now or wait until my rates go up?
If you are currently a CFE customer, it is important to understand the newly deregulated options available to you versus staying with CFE. The market will then dictate the best time to make a change. Please note that any changes will not go into effect for 6 to 12 months, so planning ahead can help you optimize your plan.
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