Residential Electricity Subsidies in Mexico

Kristin Komives

Description

Large and growing subsidies to residential consumers in Mexico have become a major policy concern. This report explains the growth of subsidies, the current distribution of subsidies across income classes, and uses utility and household survey data to simulate how alternative subsidy mechanisms could improve distributional and fiscal performance. The goal is to help inform discussion in Mexico about how to reduce subsidies and redirect them toward the poor. The findings also offer lessons for other countries that are planning tariff reforms in their electricity sectors.

Informations

• Publié par: world-bank-publications
• Publié le: 04 février 2009
• Nombre de lectures: 21
• EAN13: 9780821378861
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

WORLD BANK WORKING PAPER NO. 160
Residential Electricity Subsidies
in Mexico
Exploring Options for Reform and for Enhancing
the Impact on the Poor
Kristin Komives
Todd M. Johnson
Jonathan D. Halpern
José Luis Aburto
John R. Scott
THE WORLD BANK11503-00a_FM_rev.qxd 1/6/09 9:44 AM Page i
WORLD BANK WORKING PAPER NO. 160
Residential Electricity Subsidies
in Mexico
Exploring Options for Reform and for Enhancing
the Impact on the Poor
Kristin Komives
Todd M. Johnson
Jonathan D. Halpern
José Luis Aburto
John R. Scott
THE WORLD BANK
Washington, D.C.11503-00a_FM_rev.qxd 1/6/09 9:44 AM Page ii
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ISBN-13: 978-0-8213-7884-7
eISBN: 978-0-8213-7886-1
ISSN: 1726-5878 DOI: 10.1596/978-0-8213-7884-7
Library of Congress Cataloging-in-Publication Data
Residential electricity subsidies in Mexico: exploring options for reform and for enhancing the
impact on the poor/Kristin Komives ...[et al.].
p. cm. — (World Bank working paper; no. 160)
Includes bibliographical references and index.
ISBN 978-0-8213-7884-7 (alk. paper)—ISBN 978-0-8213-7886-1 (electronic: alk. paper)
1. Electric utilities—Subsidies—Mexico. 2. Electric utilities—Rates—Mexico. 3. Subsidies—
Mexico. I. Komives, Kristin.
HD9685.M62R47 2009
333.793'23—dc22
200805180611503-00a_FM_rev.qxd 1/6/09 9:44 AM Page iii
Contents
Acronyms and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Residential Electricity Subsidies and Tariffs in Mexico . . . . . . . . . . . . . . . . . . . . . . 5
3. Distributional Incidence of Residential Electricity Subsidies . . . . . . . . . . . . . . . . 15
4. Assessment of Alternative Subsidy Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5. Synthesis of Findings and Ways Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
APPENDIXES
A: Evolution of Residential Electricity Subsidies and Tariffs in Mexico . . . . . . . . . . . . 51
B: Residential Electricity Tariffs in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
C: Tariff Reclassifications, 2002–06. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
D: Analysis of Subsidies Using CFE Data61
E: Analysis of SUsing ENIGH Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
F: Tariff Reform Scenarios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
iii11503-00a_FM_rev.qxd 1/6/09 9:44 AM Page iv11503-00a_FM_rev.qxd 1/6/09 9:44 AM Page v
Acronyms and Abbreviations
CAS Chile’s Means-tested Program (Caracterización Social)
CFE Mexico National Electricity Commission (Comisión Federal de
Electricidad)
DAC High Consumption Residential Tariff (Tarifa Doméstica de Alto
Consumo)
ENIGH Mexico National Household Income and Expenditure Survey
(Encuesta Nacional de Ingresos y Gastos de los Hogares)
GDP Gross domestic product
HH Household
IBT Increasing block tariff
IPP Independent power producer
kWh Kilowatt-hour
LFC Central Light and Power, Mexico City (Luz y Fuerza del Centro)
MP Mexican peso
MWh Megawatt-hour
OECD Organisation for Economic Co-operation and Development
Oportunidades Mexico’s conditional cash transfer program for the poor
Oportunidades Oportunidades program focused on energy (established 2007)
Energéticas
Pidiregas Deferred financing mechanism to support private sector energy sector
investment in Mexico (Programas de Inversión de Impacto Diferido
en el Gasto)
RES Residential Electricity Schedule
SEDESOL Ministry of Social Development (Secretaría de Desarrollo Social)
SENER Ministry of Energy (Secretaría de Energía)
SHCP Ministry of Finance (Secretaría de Hacienda y Crédito Público)
VDT Volume differentiated tariff
Currency Equivalents
Currency Unit = Mexican Peso
Exchange Rate
(Exchange Rates Effective April 3, 2008)
1 US Dollar = 10.557 Mexican Pesos11503-00a_FM_rev.qxd 1/6/09 9:44 AM Page vi11503-00b_Exec_Sum_rev.qxd 1/6/09 9:46 AM Page vii
Executive Summary
This report addresses a pressing issue in Mexico’s electricity sector—the large and growing
subsidies to residential consumers and their regressive incidence across different segments
of the population. It responds to requests from the Ministry of Energy (SENER) to provide
a preliminary assessment of alternatives to the current subsidy system, building on prior
collaboration between the Government of Mexico and the World Bank on the distribu-
tional impact of public spending, the performance of conditional cash transfer programs
and other poverty-targeted programs, and related work on pricing and subsidies for infra-
structure services. This study was designed as the first phase of a multiphase program of
collaborative analytical work. This first phase provides estimates of the distributional and
fiscal performance of alternative subsidy targeting mechanisms to help inform discussion
and deliberations on feasible goals and practical approaches over the medium term. A sec-
ond phase would address transition paths, specific compensatory mechanisms, and deci-
sion processes for pursuing the options that the Mexican authorities deem most promising.
Electricity subsidies in Mexico are among the largest in the world (US$9 billion in
2006) and have absorbed a significant proportion of public resources. Subsidies in 2006
were equivalent to about 1 percent of gross domestic product and were more than one-third
of total electricity sector revenues. Over two-thirds of electricity subsidies go to residential
consumers, and the volume of subsidies to residential customers increased by 46 percent
between 2002 and 2006 in real terms.
Tariff subsidies of this magnitude impact heavily on the performance of the electric-
ity sector and on Mexican society more generally.
■ First, the cost of the subsidies needs to be covered in some way—if not by con-
sumers, then by government; if not directly by the government, then by reduced
spending on system expansion to meet growing demand, on service quality upgrades,
and on operations and asset maintenance. Fiscal transfers to the utilities divert
resources from priority social and economic programs and reduce fiscal space for
financing priority investments in the electricity sector. The 2006 federal budget for
investment in electricity (excluding the Programas de Inversión de Impacto Diferido
en el Gasto [Pidirigas]) was 40 billion pesos, only slightly larger in nominal terms