Energy Safety Nets Mexico Case Study Acknowledgements

ENERGY SAFETY NETS MEXICO CASE STUDY ACKNOWLEDGEMENTS

The Energy Safety Nets: Mexico Country Study was Benjamín Bautista Torres, Carlos Jaime Vazquez, researched and written by partners in the offices of Danilo Chavez, Édgar Alvarado Dominguez, Fran- the Ombudsman Energía México (http://www.om- cisco de la Isla Corry, Luis Muñoz Cano, Ricardo budsmanenergia.org.mx). The lead researcher was Ángel Granados López, Arno van den Bos), Priva- Paul Sanchez ([email protected]), te Sector (Arturo Rodas Grapaín, Brandon Arturo supported by a team that included Danilo Chavez, Lemus Ramos, Daniela Loredo, Diana Nava, Edu- Claudia Bello, Adrian Morales, Abigail Bello and ardo Meza, Elena Lozano, José Luis Chavez, Juan Aban Moreno. Pablo Aguilar Guillén, Julián Loyo Helo, Leopoldo Cruz Guerrero, Manuel Paredes Rodriguez, Marco The research team acknowledges the contribu- Blanke, Nayeli Gonzalez, Óscar Sánchez Santillán, tions to this work of the following workshop atten- Salvador Rosales Reyes, Samuel Sorino Fernan- dees and key interviewees: dez, Yeshua Ordaz), ASOLMEX (Israel Hurtado), CFE (Marco Antonio González and Ruben Filemón Academia (Adriana Coba, Anahí Olmos, Karla Ri- Flores Garcia), COLEF (Rigoberto García Ochoa), calde Cedano, María de Lourdes Porras Álvarez, COLMEX (Landy Lizbeth Sánchez), CONUEEE Moisés Silva Candia, Natalia Flores Jaramillo, Ni- (former) Juan Cristobal Mata Sandoval, CRE (Ed- dia Vallares, Norma Angélica Beltran Zarza, Paolo gar López Satow and Ricardo Granados López, Grabriel Paez Orozco, Quetzali Gonzalez, Xolo- and (former) Álvaro Efraín Tellez Rangel), EWT zochilt Aquino Campos, Cynthia Flores Santana), (Elié Villeda), IISD (Lourdes Sánchez), Municipal Civil Society (Aban Alonso Moreno Aguilar, Abi- Government of Huixquilucan (Gustavo Rodríguez gail Bello, Adrián Morales Ríos, Ana Lilia Moreno, Santos), Municipal Government of San Antonio la Claudia Bello, Francisco Alejandro Contreras del Isla (Lizeth Sandoval), Sedesol (Mauricio Bermeo Valle, Francisco Arturo López González, Guiller- – former), SENER (Danilo Chavez Rodríguez, Ed- mo Castillo Espinosa, Javier Gama Solis, María gar Alvarado, Héctor Moreira Rodríguez – former, Fernanda Ballesteros Arias, Nancy Nallely Bello Luis Muñozcano – former), State Government of Reyes), Government (Agustin Romero Patiño, Durango (Efraim Castellanos Frayre), Tec de Mon- Alberto Campos Osorio, Alejandro Lara Fierro, terrey (Araceli Ortega Díaz), WRI (Inder Rivera).

This report is based on research jointly implemented by Ombudsman Energía Méxi- co, the Overseas Development Institute (ODI) and the Catholic Agency for Overseas De- velopment (CAFOD). The research in Mexico is part of a broader program of energy safety nets research also carried out in Brazil, Ghana, India, Indonesia and Kenya funded by Sustainable Energy for All (SEforALL) as part of its People-Centered Accelerator work program.

ENERGY SAFETY NETS | MEXICO CASE STUDY 2 TABLE OF CONTENTS

ACKNOWLEDGEMENTS 2

LIST OF FIGURES 5

LIST OF TABLES 5

ABBREVIATIONS 6

MAP OF MEXICO 8

EXECUTIVE SUMMARY 9

INTRODUCTION 11

CONTEXTUAL OVERVIEW 13

ECONOMIC AND SOCIAL CONTEXT 14

Inequality within Mexico 15

Poverty 16

ACCESS TO, AND CONSUMPTION OF, MODERN ENERGY SERVICES 19

Electricity Access 19

Clean Cooking Access 21

Energy Consumption by Income Level 21

Energy Subsidies 22

Energy Policy Reform 23

SOCIAL SAFETY NETS 24

ENERGY SAFETY NETS IN MEXICO 27

DIFFERENTIATED ELECTRICITY TARIFFS 28

OPORTUNIDADES ENERGÉTICAS 31

FONDO DE SERVICIO UNIVERSAL ELÉCTRICO (FSUE) 34

PROVISION OF SUBSIDIZED LPG FOR HOUSEHOLD COOKING 36

CONCLUSIONS 39

POLICY MEASURES 40

EFFECTIVENESS OF ENERGY SAFETY NETS 40

LINKAGES TO SOCIAL ASSISTANCE PROGRAMS 41

ENERGY SAFETY NETS | MEXICO CASE STUDY 3 IMPROVING ENERGY SAFETY NETS 42 RECOMMENDATIONS 43 REFERENCES 45 ENDNOTES 49 GLOSSARY 50 COPYRIGHT AND DISCLAIMER 52

ENERGY SAFETY NETS | MEXICO CASE STUDY 4 LIST OF FIGURES

Figure 1: Regions of Mexico 14 Figure 2: Moderate (left) and extreme (right) poverty distribution by state 17 Figure 3: Residential energy consumption by region, 2018 20 Figure 4: Share of total income spent on energy goods by income decile, 2018 21 Figure 5: Major changes to the Mexican energy sector 22 Figure 6: Electricity tariff distribution by municipality 29 Figure 7: Communities without access to electricity 35 Figure 8: Distribution of Diconsa stores 38

LIST OF TABLES

Table 1: Poverty incidence in Mexico 16 Table 2: Extreme and moderate poverty lines, July 2019 18 Table 3: Multidimensional poverty measures in Mexico 19 Table 4: Evolution of social safety nets in Mexico 25 Table 5: New social safety nets of López Obrador Administration, 2019 26 Table 6: Summer residential energy tariffs, June 2019 30 Table 7: Winter residential electricity tariffs, January 2019 31 Table 8: Estimated contribution from Oportunidades Energéticas to monthly household energy costs 33 Table 9: Estimated annual cost of Oportunidades Energéticas (USD 2011) 34 Table 10: LPG subsidies through Diconsa stores by state 39

ENERGY SAFETY NETS | MEXICO CASE STUDY 5 ABBREVIATIONS

CFE Comisión Federal de Electricidad CLAD Centro Latinoamericano de Administración para el Desarrollo CONAPO Consejo Nacional de Población CONASUPO Compañía Nacional de Subsistencias Populares CONEVAL Consejo Nacional de Evaluación de la Política de Desarrollo Social CONUEE Consejo Nacional para el Uso Eficiente de la Energía DAC Tarifa Doméstica de Alto Consumo DICONSA Distribuidora y comercializadora S.A. ENCEVI Encuesta Nacional sobre Consumo de Energéticos en Viviendas Particulares ENIGH Encuesta Nacional Ingreso – Gasto de los Hogares ESN Energy Safety Net FIDE Fideicomiso para el Ahorro de Energía Eléctrica FSUE Fondo de Servicio Universal Eléctrico IBT Increasing Block Tariff IEPS Impuesto Especial sobre Producción y Servicios IFE Instituto Federal Electoral INE Instituto Nacional Electoral INEGI Instituto Nacional de Estadística y Geografía LIE Ley de la Industria Eléctrica LPG Liquefied Petroleum Gas MORENA Movimiento de Regeneración Nacional PAN Partido Acción Nacional PEMEX Petróleos Mexicanos PRI Partido Revolucionario Institucional PRODESEN Programa de Desarrollo del Sistema Eléctrico Nacional SEDESOL Secretaría de Desarrollo Social SEGALMEX Seguridad Alimentaria Mexicana

ENERGY SAFETY NETS | MEXICO CASE STUDY 6 SENER Secretaría de Energía SHCP Secretaría de Hacienda y Crédito Público VDT Volume-Differentiated Tariff

A note on currency

Mexico uses the Mexican peso (MXN). For currency conversions, the exchange rate used is an average of the relevant year(s) detailed in the text. Where no year is provided, the report assumes an exchange rate of USD 1 = MXN 18.74.

ENERGY SAFETY NETS | MEXICO CASE STUDY 7 MAP OF MEXICO

Baja California

Sonora

Chihuahua

Baja California Sur Coahuila de Zaragoza

Nuevo Sinaloa Leon

Durango

Tamaulipas

Zacatecas San Luis Potosí

Aguascalientes Nayarit

Yucatan Guanajuato Querétaro de Arteaga Jalisco Hidalgo

Quintana México Roo Tlaxcala Michoacán Distrito Federal Champeche de Ocampo Veracruz-Llave Colima Morelos Puebla Tabasco

Guerrero

Oaxaca Chiapas

ENERGY SAFETY NETS | MEXICO CASE STUDY 8 EXECUTIVE SUMMARY

This case study examines the use of social assis- holds but two of the three were relatively short- tance mechanisms in Mexico to enable access lived, and the future of the third is uncertain. The to modern energy services by very poor and first, the energy component of Oportunidades, vulnerable households, referred to as Energy the national social assistance program, was Safety Nets (ESNs). Mexico has two decades of named Oportunidades Energéticas and provided experience with social safety nets providing cash cash transfers to eligible households to support payments to eligible poor families. Since the part of their energy expenditure; it was imple- 1970s, successive governments have relied on mented under only one federal administration, general energy subsidies to enable access to en- between 2007 and 2011. The second, a pilot pro- ergy. These subsidies disproportionately benefit gram selling reduced-price LPG through a small wealthier households who consume more energy number of Diconsa stores, began in 2017 and and can fail to reach some of the poorest and ended in 2018. The third, the Universal Electricity most vulnerable people. General energy subsi- Service Trust Fund (Fondo de Servicio Universal dies also consume fiscal resources that could be Eléctrico (FSUE)) was established to provide elec- reallocated to other programs without adding to tricity to people in remote communities without the total state budget. access. It began operating in 2016 and by mid- 2018 had connected 42,000 households, with an- The study analyzes four programs in Mexico that other 96,000 planned. meet the definition of an Energy Safety Net. The most important ESN is a subsidy for residential elec- Oportunidades Energéticas and the sale of sub- tricity consumption. Though this is not a general en- sidized LPG through Diconsa stores no longer ergy subsidy, its design means that it is received by exist. Both schemes were initiated during the last almost all electricity consumers. The complex elec- months of a presidential tenure and ended by the tricity tariff structure in Mexico includes an increasing next federal government. As of late 2019, FSUE block tariff, (IBT) a volume-differentiated tariff (VDT) was on hold pending a review by the López Ob- and a regionally-differentiated tariff, with below-cost rador Administration. tariffs for all consumers except a small number whose energy use is high. On average, the subsidy covers While subsidized electricity tariffs and support 54 percent of the cost of residential electricity and in for access to electricity through the FSUE have aggregate is equivalent to 0.5 percent of total GDP. not been linked to social assistance programs, Although the subsidized tariff provides support for Oportunidades Energéticas was a component of poor and vulnerable households, it is perceived as a bigger social safety net and the reduced-price an inefficient mechanism for doing so. LPG pilot scheme used Diconsa stores that were set up to supply subsidized goods to poor and The other three ESNs analyzed in the study were marginalized communities. The energy policy re- better targeted to poor and vulnerable house- forms of 2013 provide a mandate for a targeted

ENERGY SAFETY NETS | MEXICO CASE STUDY 9 social assistance program to support timely and • The scope of the FSUE should be widened adequate access to energy at affordable prices to support access to clean cooking technol- for vulnerable groups of users, but further analysis ogies for the poorest and most vulnerable is needed on the specific policies and measures households. to implement such a program. However, several • Subnational governments and agencies should recommendations emerge from this study: be involved in the design of ESNs, be encouraged to measure and periodically evaluate levels • Electricity tariff subsidies should be targeted of energy poverty in their jurisdictions and be in- at poor households. This could be achieved by volved in the targeting of beneficiaries for ESNs. revising the threshold level for high-consuming • Further research should be undertaken to in- tariffs or determining eligibility for subsidized form energy policy reforms and the design tariffs using the social assistance register. of ESNs.

ENERGY SAFETY NETS | MEXICO CASE STUDY 10 INTRODUCTION

ENERGY SAFETY NETS | MEXICO CASE STUDY 11 The main objective of this case study is to under- This country case study builds on findings pre- stand social assistance mechanisms, known as sented in the working paper Energy Safety Nets: Energy Safety Nets (ESNs), in Mexico that enable A Literature Review (Scott and Pickard 2018). poor and vulnerable households to access mod- However, the term Energy Safety Net is rare- ern energy services. ly used in literature consulted for this research and had to be explained to invited experts from The report provides in-depth information on the the sector in interviews and workshops. While following aspects of ESNs in Mexico: the contex- there have been attempts at ESNs throughout tual background, the modalities and operation Mexico’s history, the term is not yet used wide- of ESNs and their institutional and procedural ly to describe the programs discussed in this characteristics. It assesses the evidence on the research. impact and effectiveness of ESNs in relation to providing energy access and increasing energy This country case study—like the other five, cov- consumption by different social groups, their in- ering Brazil, Ghana, India, Indonesia and Kenya— teraction with other social protection programs, seeks to answer four research questions: challenges to their delivery and effectiveness, and the effects of these measures on the opera- • What policy measures have been used in tion of energy markets. Mexico to enable very poor and marginalized people to access and use modern energy The analysis of Mexico’s experience with ESNs services? was carried out in mid-2019 and included qual- • How effective have these measures been in itative and quantitative analysis. The qualitative enabling the poorest social groups to access approach included two consultative workshops, and use modern energy services? a literature review, 35 interviews with key infor- • What links have there been/are there between mants and an electronic survey to broaden partic- these measures and wider/other social assis- ipation from regions in the country outside of the tance programs? capital city. The quantitative approach involved • What changes could be made to enhance the reviewing data from national surveys (ENIGHi and effectiveness of existing policy measures in ENCEVIii) and statistics on energy consumption, enabling very poor people to access modern tariffs, prices and subsidies. cooking energy services?

Energy Safety Net (ESN) is an umbrella term ESNs can make physical access (i.e. connec- for government-led approaches to support tions) to electricity or clean fuels affordable for very poor and vulnerable people to access poor and vulnerable people, or they can make essential modern energy services, defined as the unit price of electricity or fuel affordable electricity and clean fuels and technologies to consume. ESNs include some form of tar- for cooking, by closing the affordability gap geting or eligibility criteria to direct benefits between market prices and what poor cus- to those who need them. tomers can afford to pay.

ENERGY SAFETY NETS | MEXICO CASE STUDY 12 CONTEXTUAL OVERVIEW

ENERGY SAFETY NETS | MEXICO CASE STUDY 13 Mexico is the fifth largest country by territo- how households consume energy throughout ry in the Americas and the thirteenth largest in the year. the world (INEGI 2018a). It has a population of close to 130 million inhabitants making it the Mexico’s experience with ESNs is intrinsically tenth most populous country in the world, and linked to macro-political changes (see Box 1) but the largest Spanish-speaking state (INEGI 2018a). has also been driven by socioeconomic and ener- Mexico is composed of 32 federal entities with gy-related variations. their own local governments and almost 2,500 municipalities, covering almost 2,000,000 square ECONOMIC AND SOCIAL CONTEXT kilometres (770,000 square miles). In 2018, Mexico had the world’s fifteenth-largest The country can be divided into three regions: economy with a nominal GDP of USD 1.3 trillion northern, central and southern. Each region has (IMF 2018). However, its per-capita GDP at USD distinct characteristics regarding climatic pat- 10,073 was the lowest in the OECD countries terns, energy access and energy consumption (OECD 2018). Income inequality in Mexico is ex- patterns. In the warmer northern region, the tremely high and social and economic disparities maximum electricity demand occurs at midday are reflected in levels of access to energy and en- in summer, owing to the use of air conditioners. ergy consumption. In the colder southern region, energy demand peaks during winter nights due to household In the first quarter of 2019, the economically ac- heating usage. These regional variations impact tive population (people aged 15 and older) was

Figure 1 Regions of Mexico

Baja California

Sonora

Chihuahua NORTHERN REGION

Baja California CENTRAL REGION Sur Coahuila de Zaragoza SOUTHERN REGION

Nuevo Sinaloa Leon

Durango

Tamaulipas

Zacatecas San Luis Potosí

Aguascalientes Nayarit

Yucatan Guanajuato Querétaro de Arteaga Jalisco Hidalgo

Quintana México Roo Tlaxcala Michoacán Distrito Federal Champeche de Ocampo Colima Morelos Puebla Tabasco Veracruz- Llave Guerrero

Oaxaca Chiapas

Source: INEGI 2019

ENERGY SAFETY NETS | MEXICO CASE STUDY 14 Box 1: Impact of national politics on welfare programs

The story of modern Mexican institutions and the an election had led to a political transition from country’s industrial, social and economic orga- the governing party to an opposition party (Wold- nization cannot be separated from the history of enberg 2012). Fox was followed by another PAN post-revolutionary corporatism developed over president, Felipe Calderón, who won the 2006 the 70 years of one-party rule government be- election by 1 percent. ginning at the end of the 1920s. The Institutional Revolutionary Party (Partido Revolucionario Insti- Following these two opposition administrations, tucional (PRI)) drove the formation of the federal PRI returned to power in the 2012 presidential elec- government and subsequently controlled both tion when Enrique Peña Nieto, former governor of houses in the federal legislature, in addition to the State of Mexico, was elected president. In 2018, state and municipality governments, advancing the twice runner-up Andrés Manuel López Obrador presidents, governors and members of the legis- won the presidential election with his party Move- lature from 1929 to 2000. ment for National Regeneration (Movimiento de Regeneración Nacional (MORENA)). In 2000, Vicente Fox, the candidate for a new party, the Party for National Action (Partido Acción Each one of these recent four administrations had Nacional (PAN)), was elected President of Mexico. its own political priorities and amended existing This was the first time in the country’s history that programs and policies to implement its objectives.

Period President Priorities Welfare policy changes

2000- Vicente Fox Public Created Oportunidades as a direct cash transfer 2006 (PAN) administration from a federal agency using federal census, based reform on the 1997 Progresa program

2006- Felipe Calderón Public security Continued with Oportunidades but included 2012 (PAN) several components such as pensions for the elderly and policies regarding agriculture and energy

2012- Enrique Peña Nieto Economic Transformed Oportunidades into Prospera to be 2018 (PRI) reforms more focused on the “crusade against hunger” component

2018- Andrés Manuel López Austerity and Prospera to be replaced with a series of social 2024 Obrador anti-corruption welfare programs that consist primarily of cash (MORENA) transfers aimed at young people, pensions for the elderly and single mothers, young students and disabled people

approximately 56 million, representing 60 percent Inequality within Mexico of the population. The unemployment rate was low, accounting for 3.5 percent of the population, The Gini Index is a measure of household in- but informal sector employment represented al- come inequality.iii Mexico has a Gini coefficient most 28 percent and the subemployment rate of 0.458, the highest in the OECD countries.iv was 7.4 percent. The female unemployment rate This value indicates that the income of the was 3.6 percent and male unemployment was wealthiest 20 percent is 10 times greater than slightly lower at 3.4 percent (INEGI 2019). that of the poorest 20 percent (OECD 2019).

ENERGY SAFETY NETS | MEXICO CASE STUDY 15 While at the national level Mexico’s Human De- Poverty velopment Index (HDI) score of 0.774 places it in the “high” human development category, In 2018, 61 million people had an income below the level of development is uneven across the the moderate poverty line (MPL), representing country. Some federal entities, such as Ciudad almost 50 percent of the total population. Within de México, Nuevo León, Querétaro and Sonora this group, 21 million (17 percent of the popu- (see map on page 8), fall into the “very high” lation) lived with an income below the extreme HDI category, comparable with countries such poverty line (EPL). Moreover, poverty levels con- as Argentina, Chile, Kuwait, Malaysia and Russia. tinue to vary significantly by region, with extreme However, federal entities such as Chiapas, Guer- poverty persisting in relatively few, southern and rero and Oaxaca rank below 0.7 and are in the south-central states. The five poorest states con- “low” HDI category along with countries such tain 62 percent of the total population living in as Bolivia, Democratic Republic of Congo, Iraq, extreme poverty conditions. This figure rises to Morocco and South Africa (UNDP 2018). Even at 81 percent for the 10 poorest states while the the state level, the locations and dimensions of remaining 22 states have less than 2 percent of poverty are complex and varied. For example, their total population living in extreme poverty. Ciudad de México, in the "very high" HDI category, has one of the country’s highest unemploy- Table 1 shows that poverty incidence across all states ment rates (4.8 percent) while in the lower-HDI is higher for rural households than for urban house- regions of Guerrero and Oaxaca unemployment holds, for indigenous households than for non-in- rates are among the lowest (1.6 percent and 1.5 digenous households, and for women more than for percent, respectively) (INEGI 2019). men, especially when multiple factors are combined.

Table 1 Poverty incidence in Mexico

TOTAL POVERTY MODERATE POVERTY EXTREME POVERTY RATE (%) RATE (%) RATE (%)

Urban 39.1 34.4 4.7

Rural 58.2 40.8 17.4

Indigenous 77.6 42.8 34.8

Non-indigenous 41.0 35.2 5.8

Women 43.1 36.4 6.7

Men 43.0 35.4 7.6

Rural, indigenous females 85.1 40.1 45.0 (least-favored group)

Urban, non-indigenous men 37.2 33.2 4.0 (most-favored group)

Source: CONEVAL 2017

ENERGY SAFETY NETS | MEXICO CASE STUDY 16 Figure 2 Moderate (above) and extreme (below) poverty distribution by state

S RANGE OF MODERATE POVERTY DISTRIBUTION (%)

C 14–35 S C 35–50

N 50–65 S D 65–80

T S

A N

Y G A

M R T M D F C O C M T G

O C

S RANGE OF EXTREME C POVERTY DISTRIBUTION (%)

C S C 0–10

10–20 N S

D 20–30

A N

Y G A

M R T M D F C O C M T G

O C

Source: CONEVAL 2019 and CONEVAL 2017 Note: Estimations based on the MEC of MCS-ENIGH 2018.

ENERGY SAFETY NETS | MEXICO CASE STUDY 17 In Mexico, poverty is considered multidimension- lack any of the six social rights, then it is consid- al and includes economic welfare and access to ered non-poor. If a household’s income is above social rights. Levels of poverty are currently mea- the MPL but it lacks any of the six social rights, it sured using income and six additional indicators: is considered a vulnerable household. A house- education, health, social security, nutrition, hous- hold with income below the MPL with access to ing and access to basic services. The first step the six social rights is categorized as moderate- in a poverty assessment is to define the extreme ly income poor, while a lack of any of the social and moderate poverty lines for income separate- rights indicates a multi-dimensional moderately ly for rural and urban areas (Table 2). poor household. If a household’s income is below the extreme poverty line (EPL) it is catego- Once the income dimension of poverty has been rized as an extreme poor income household if it identified, the assessment considers the six social lacks access to one or two social rights, and as a rights indicators (Table 3). If a household is above multi-dimensional extreme poor household if it the moderate poverty line (MPL) and does not lacks three or more social rights.

Table 2 TAE EXTREME AND MODERATE OERTY INES USD Extreme and moderate poverty lines, July 2019

URAN RURA

MONTY DAIY MONTY DAIY

E E $83 $2.8 $59 $2

M M `$162 `$5.4 `$105 `$3.5

Source: CONEVAL 2018

Box 2: Evolution of poverty measurement in Mexico

Prior to 2002, Mexico did not have a standard the Social Development Act (Ley General de De- methodology for poverty measurement. sarrollo Social (LGDS)) of 2004.

To address the lack of consistency between fig- In addition to regulating and coordinating the ures used by different government bodies and evaluation of social development policies and academic institutions, in 2001 the federal gov- programs, CONEVAL’s mandate was to develop ernment convened experts to develop a stan- guidelines and criteria for defining and measur- dard poverty index and subsequently published ing poverty. Data were to be disaggregated at poverty figures for the first time. Mistrust of the the municipal level and collected every five years published data led to the creation of an indepen- to enable regular monitoring of changes in the dent policy and research institution, the National levels of poverty in different states and munic- Council for the Evaluation of Social Development ipalities, and identify policy priorities. In 2018, Policy (Consejo Nacional de Evaluación de la CONEVAL published its first 10-year analysis Política de Desarrollo Social (CONEVAL)), under (2008 to 2018).

ENERGY SAFETY NETS | MEXICO CASE STUDY 18 Table 3 Multidimensional poverty measures in Mexico

ACCESS SOCIAL INCOME EDUCATION HEALTH NUTRITION HOUSING TO BASIC CATEGORY SECURITY SERVICES

Case 1 Above MPL Non poor

Non poor with Case 2 Above MPL a vulnerability

Income moderate Case 3 Below MPL poor

Multidimensional Case 4 Below MPL moderate poor

Income extreme Case 5 Below EPL poor

Multidimensional Case 6 Below EPL extreme poor

Source: CONEVAL 2018

ACCESS TO, AND CONSUMPTION OF, clude the cost of installing grid infrastructure MODERN ENERGY SERVICES and the likelihood that total consumption would not be enough to cover operating and mainte- Electricity access nance costs.

Mexico launched an intensive electrification pol- For these reasons, future electrification policy for icy in the 1960s that resulted in more than 99 communities without electricity access is shifting percent of households having access to energy towards local distributed power generation fund- by the mid-2000s. In 2016, the Federal Elec- ed by the Fund for Universal Electricity Service tricity Commission (Comisión Federal de Elec- (Fondo de Servicio Universal Eléctrico (FSUE)). tricidad (CFE)), the state-owned electric utility, This involves alternative distributed electricity estimated that 41,697 communities, home to ap- systems—including mini-grids and stand-alone proximately 440,000 households or 1.8 million systems using solar panels and batteries—and people and representing roughly 1.5 percent training for communal ownership, operation and of the population, had no access to electricity. maintenance. Nonetheless, there are no data on Almost 31,000 of these communities comprise FSUE’s progress to date. There is also a lack of only one or two households, making it cost inef- clarity as to which entity is responsible for imple- fective to extend the electricity grid to connect mentation and payment models (i.e. if beneficia- them (SENER 2016a). These communities are ries are obliged to pay for the systems, and, if also located in remote and difficult-to-access ar- so, how much and to which entity). The Mexican eas, typically more than five kilometres from dis- Government included a program in its most re- tribution network infrastructure (SENER 2016b). cent five-year National Development Plan (2019– Economic factors are widely acknowledged as 2024) to provide off-grid electricity to 45,000 the reason for not connecting these commu- communities, though few details have been pro- nities to the centralized grid. These factors in- vided (see Box 3).

ENERGY SAFETY NETS | MEXICO CASE STUDY 19 Box 3: The 45k communities plan

The 2019–24 National Development Plan in- vate sector actors will participate; the financing cludes a program to provide energy access for mechanisms; or the timeframe for the program. 45,000 communities via distributed renewable It also appears to contradict other government electricity generation (DRE), such as mini-grids policies. For example, CFE does not foresee in- and solar PV, focused on providing power for stallation of solar PV until 2023 according to the water pumping, milling, education and health- National Electric System Development Program care infrastructure. The plan provides no details (Programa de Desarrollo del Sistema Eléctrico about future implementation of the program. Nacional (PRODESEN)) and the investments en- The plan also excludes mention of key indicators; visaged are large-scale solar parks. There is also which communities will benefit; which entities will no mention of CFE building DRE as part of other build the infrastructure, including whether pri- social programs.

Figure 3 Residential energy consumption by region, 2018

100% 1.2% 1.2% 2.4% 2.7% 1.4% 6.2% 1.5% 31.8% 17.4% 5.8%

80% 85.2%

77.3%

0% 1.0% 60% 64.8%

40%

LP GAS

20% NATURAL GAS

ELECTRICITY

FIREWOOD

0% OTHER

NORTH CENTRAL SOUTH

Source: CONUEE 2018 and INEGI 2019

ENERGY SAFETY NETS | MEXICO CASE STUDY 20 Clean cooking access fuel oil, firewood, charcoal and candles) in 2018. However, disaggregation by income decile re- Progress on access to clean cooking has fall- veals that most of the population spend more en considerably behind progress on access to than this (Figure 4). Only the top two deciles electricity. Approximately 85 percent of Mex- spent less than the average with the lowest four ican households use a gas stove for cooking, income deciles spending 5.4 percent or more of 79 percent use LPG, and 6 percent use natural their income on energy. In contrast, households gas (INEGI 2018b). The remaining 15 percent of in the tenth decile (the richest group) spent less households use firewood as their main source of than 3.2 percent of their income on energy. cooking energy. As with income poverty, regional differences are stark with natural gas commonly used in northern states where there is infrastructure for residential supply (Figure 3). Southern Percentage of household income states, in contrast, are much more likely to use put toward meeting energy needs, firewood than gas. national average

2014 4.56% Energy Consumption by Income Level 2016 4.17% According to the National Survey of Income and Expenditure (ENIGH), an average Mexican 2018 4.35% household spent 4.35 percent of their total in- Source: ENIGH 2018 come on energy (electricity, natural gas, LPG,

Figure 4 Share of total income spent on energy goods by income decile, 2018

Income Spent on Energy Goods (%) 1%

I II III IV V VI VII VIII IX X 0% Income Decile

Source: INEGI 2019

ENERGY SAFETY NETS | MEXICO CASE STUDY 21 Figure 5 Major changes to the Mexican energy sector

• Subsidy reform is held back

• Energy reform is held back 2019

• FSUE • Mechanisms created electriﬁcation to reform general is held back subsidies 2013 • Electricity and oil and gas sectors almost completely • Structural liberalized changes 2008 to PEMEX’s governance • Attempts to further liberalize 2000 the electricity • Liberalization sector rejected permits private by Congress sector companies to generate electricity and 1992 participate in • Electricity and production of hydrocarbons natural gas and become sectors petrochemicals controlled by 1960s the state

• PEMEX and CFE granted a legal monopoly

Source: Authors’ construction

Energy Subsidies Between 2013 and 2019 the subsidy amounted to nearly USD 15 billion (CFE 2019a; SHCP 2019). Subsidies to household electricity consumption have existed within multiple tariff structures General LPG subsidies were applied between since the 1970s. These accounted for 78 percent 2003 and 2012 in the form of capping the price of the total subsidy for electricity consumption of LPG paid by customers. Because Petróleos in 2016, with agriculture and industry receiving Mexicanos (PEMEX) produced or imported 11 percent and 10 percent, respectively (San- LPG at international reference prices but then chez et al. 2018). The subsidy mechanism is ex- sold it at a regulated price, this had a large im- pressed in CFE financial statements under ‘tariff pact on its finances. The subsidy amounted to insufficiency’, i.e., losses associated with reve- around USD 11 billion over this 10-year period nue foregone because of the subsidized tariffs. (SENER 2013).

ENERGY SAFETY NETS | MEXICO CASE STUDY 22 Energy Policy Reform tion garnered enough political support to carry out a comprehensive reform of the energy sector (and The Mexican energy sector has undergone a series the Mexican Constitution) creating 10 new laws and of reforms in the last five decades (Figure 5). In the reforming 12 others. 1960s, the government put the electricity and hy- drocarbon sectors under state control and created Some of the most important changes of the Nieto legal monopolies for these sectors that were grant- Administration involved liberalizing all areas of the ed to the state-owned companies CFE and PEMEX, Mexican energy sector, creating a new set of regu- respectively. lations, and reforming subsidies for petroleum fuels and electricity to target support towards protecting The Mexican Government tried repeatedly to re- the poorest and most vulnerable and the environ- form the energy sector in 1992, 2000 and 2008 with ment. The López Obrador Administration has sought little success as the proposals were limited by the to reverse some of these changes by re-establishing provisions pertaining to state control contained in the primacy of state-owned companies, increasing the constitution and any successful changes were the state’s role in the energy market, and limiting pri- cosmetic. In 2013, Enrique Peña Nieto’s Administra- vate investments in the energy sector (PND 2019).

ENERGY SAFETY NETS | MEXICO CASE STUDY 23 SOCIAL SAFETY NETS

ENERGY SAFETY NETS | MEXICO CASE STUDY 24 Social safety nets were introduced in Mexico in the Since taking power in 2018, President López Obra- 1980s and have evolved over time. The largest so- dor’s administration has transformed the Oportuni- cial assistance effort was launched in 1988 under dades/Prospera social safety net and renamed the the name Solidaridad (Solidarity). Since then, subse- federal census that is used as the basis for target- quent administrations have changed the program’s ing (from Sedesol to Bienestar). Several social pro- priorities and renamed it. It became Progresa grams with new goals for poverty alleviation have (Progress) in 1997, Oportunidades (Opportunities) been introduced to replace Prospera, the most im- in 2002 and Prospera (Prosperity) in 2014. portant of which are listed below. As of late 2019, no Energy Safety Nets (ESNs) linked to a broader social safety net program had been announced.

Table 4 Evolution of social safety nets in Mexico

PERIOD ADMINISTRATION SOCIAL PROGRAM FOCUS AREAS CHARACTERISTICS

Nutrition, education, Cash transfers, went to the Carlos Salinas health, housing, basic 1988-1994 Solidaridad governments of federative (PRI) services and land entities property

Nutrition, health, Ernesto Zedillo Driven by political 1994-2000 Progresa education and (PRI) considerations infrastructure

Education, health, Cash transfer program using Vicente Fox nutrition, young 2000-2006 Oportunidades federal census, included (PAN) students and conditional cash transfers elderly persons

Education, health, Similar program to that Felipe Calderón nutrition, young 2006-2012 Oportunidades of the previous administration, (PAN) students, elderly included energy component persons and energy

Similar program to that of the Enrique Peña Nieto Education, health previous administration, dropped 2012-2018 Prospera (PRI) and nutrition energy component and targets for young students and elderly persons

A series of conditional and Andrés López unconditional cash transfers 2018-2024 Obrador Bienestar Multiple with separate target populations (MORENA) and desired outcomes (see Table 5)

Source: Rojas 1992; Rocha 2001; Sedesol 2007, 2012; Bienestar 2019

ENERGY SAFETY NETS | MEXICO CASE STUDY 25 Table 5 New social safety nets of López Obrador Administration, 2019

PROGRAMME TYPE DESCRIPTION TARGET AMOUNT

Indigenous people aged 1. Welfare for the Aims to contribute 65 and over; people aged Elderly USD 75 Unconditional to improve the living 68 and over; people aged (Bienestar de every two cash transfer. conditions of elderly between 65 and 68 who las personas months. people. are still part of the adultas mayores) Prospera programme.

Children and young people 2. Welfare for Aims to contribute to with permanent disabilities People with improve the living from ages 0 to 29; USD 75 Disabilities Unconditional conditions of people indigenous persons (Pensión para el every two cash transfer. with disabilities and with permanent disabilities bienestar de las months. promote social from ages 30 to 64; adults personas con inclusion. with permanent disabilities discapacidad) from ages 30 to 67.

Aims to increase the 3.“Benito Juarez” capacity of Mexican Households with childen up Conditional Scholarship families through to the age of 15 living in USD 45 cash transfer (Becas para ensuring basic extreme poverty conditions every month requiring school el Bienestar education and fostering with an income below the per household. attendance. “Benito Juarez”) familial commitment to minimum welfare line. education.

Conditional 4. Young people Aims to create Young people aged 18 to cash transfer Building employment training 29; priority is given to transfer requiring USD 200 the Future opportunities for young young people living in attendance at every month for (Jóvenes unemployed people indigenous communities, place of work up to 12 months. construyendo who are not enrolled extreme poverty or regions and completion el futuro) in school. with high rates of violence. of reports.

5. Young People Conditional cash Writing the Aims to support young transfer requires USD 270 Future people who are enrolled Young people aged attendance at a every two (Jóvenes in a higher education 29 years or below. higher education months. escribiendo institution. institution. el futuro)

Agricultural workers whose income is below Conditional cash Aims to improve the minimum welfare line, 6. Sowing Life transfer requires the living conditions USD 280 (Sembrando who live in rural locations attendance at of agricultural every month. vida) and who own 2.5 hectares a workplace. workers. of land that can be developed as an agroforestry project.

7. Welfare for USD 85 every two the Children of Conditional cash Employed mothers with months for up to 3 Working Mothers Aims to provide transfer requires children aged 1 to 3 or with children; USD 200 (Bienestar de childcare support mother's proof children with permanent every two months for las niñas y niños, for working mothers. of employment. disabilities aged 1 to 6. up to 3 children with hijos de madres a disability. trabajadoras)

Source: Bienestar 2019

ENERGY SAFETY NETS | MEXICO CASE STUDY 26 ENERGY SAFETY NETS IN MEXICO

ENERGY SAFETY NETS | MEXICO CASE STUDY 27 This section analyzes four measures deployed by can afford to consume a basic amount of electric- the Mexican Government to promote energy ac- ity. To this end, the state-owned electricity sector cess and consumption by the poorest and most has provided a lifeline tariff to enable grid-con- vulnerable people. nected households to consume a basic amount of electricity every month at a heavily discounted DIFFERENTIATED ELECTRICITY rate. TARIFFS In the 1970s, there were only two residential tar- The most important ongoing measure support- iffs, 1 and 1A. Over time, the tariff system evolved ing electricity consumption for poor households and the prices and threshold consumption levels in Mexico is the electricity tariff structure. This is a for the lifeline and subsequent blocks now vary complex measure that has changed over time to depending on climatic factors to account for vary- include both volume-differentiated tariffs (VDT) ing electricity needs (cooling during summer and and increasing block tariffs (IBT) that vary accord- heating during the winter). There are now eight ing to geographical location, average tempera- tariffs (1, 1A, 1B, 1C, 1D, 1E, 1F and the unsubsi- ture and season. Historically, the tariffs were also dized DAC or high-consumption tariff) based on discretionally differentiated to favor administra- geographical zone, average temperature of the tive districts ruled by the governing party. region, and the season. The most recent tariff, 1F, was created in 2002 to benefit communities Background, aims and implementing enduring extreme weather conditions. agencies The cost of the electricity subsidy is largely cov- Mexico’s overarching energy policy since the ered by the Finance Ministry (Secretaría de Ha- 1970s has sought to ensure that every household cienda y Crédito Público (SHCP)). At the end of

Box 4: Increasing block tariffs and volume-differentiated tariffs

Two types of electricity tariff are commonly used A VDT has a different price per unit depending on for quantitative targeting, increasing block tariffs the total quantity consumed. Consumption levels (IBT) and volume-differentiated tariffs (VDT). are divided into blocks, with a different unit price attached. The higher the quantity consumed, the In a block tariff structure, a different price per higher the unit price for all the electricity consumed. unit (USD per kWh) is charged for different blocks When the unit price for low quantity consumption of electricity consumption. In an IBT, the unit is subsidized, consumers whose consumption is price increases with each successive consump- above the quantity threshold do not benefit. tion block. All consumers benefit when the price of the first one or two blocks is subsidized, be- In some countries, including Mexico, tariff struc- cause those initial increments of consumption are tures are hybrids including IBT and VDT for dif- charged at a lower kWh price. ferent blocks.

Sources: Komives at al. 2005; Beylis and Cunha 2017; Siyambalapitiya 2018

ENERGY SAFETY NETS | MEXICO CASE STUDY 28 every fiscal year, during the budgeting process new López Obrador Administration, which came for the year ahead, CFE requests a transfer to into power in 2018, has decided that existing compensate for losses from tariff insufficiency in tariff schemes will continue largely unchanged the next fiscal year. In 2018, CFE received a USD for residential users while a new mechanism is 2.5 billion cash transfer for the 2019 fiscal year. developed. This amount was insufficient to cover the total cost to CFE, which must use its own resources One option for reform may arise from the Elec- to cover the shortfall. This recovery includes rev- tric Industry Law, Ley de la Industria Eléctrica, enue from consumers under the DAC tariff who (LIE) enacted in 2014 and currently on hold. Ar- pay on average 58 percent more than the supply ticle 116 states that the Secretariat of Energy cost (Hancevic et al. 2019). (Secretaría de Energía (SENER)) will establish policies and mechanisms to supply electricity The subsidy system was supposed to be dis- to rural communities and marginalized urban continued in 2018, per the 2013 Energy Reform zones at the lowest cost possible for the state. that aimed to end state-monopolization of the The law instructs SENER, SHCP and Bienestar, electricity industry. However, 2018 was an elec- with the help of CRE and CONEVAL, to deploy tion year and consideration was given to the a targeted social assistance program to sup- potential social turmoil in response to removing port timely and adequate access to energy at subsidies. The Peña Nieto Administration decid- affordable prices for vulnerable groups of users ed to extend the life of the tariff structure. The (DOF 2019).

Figure 6 Electricity tariff distribution by municipality

From smallest to biggest subsidy

Source: CFE 2019

ENERGY SAFETY NETS | MEXICO CASE STUDY 29 Modalities of the tariff system If a household’s average consumption over the previous year is more than the VDT threshold (the There are eight different tariff categories for threshold of the third or fourth block—ranging residential electricity customers. Seven of from 250 to 2500 kWh/month)—the household is these include a partly subsidized IBT structure moved to the unsubsidized domestic high-con- with a different unit price (USD per kWh) for sumption tariff, (Servicio Doméstico de Alto Con- successive levels of consumption (Tables 6 and sumo (DAC)). Only an estimated 1-2 percent of 7). The tariff thresholds and unit prices depend utility customers pay the DAC. on the geographical zone, the average temperature of the region, and the season (Figure The electricity tariffs are set by the SHCP, but 6). For most tariff categories, the kWh thresh- how the tariffs have changed over time has de- old increases in summer (April-September) to pended on how they were managed by the cen- reflect the increase in demand for electricity for tral administration. For example: cooling (Table 6). During the winter (October– May), the lifeline block covers the first 75 kWh • During President Calderón’s tenure (2006– of electricity each month for a price of USD 2012) tariffs were indexed to fuel inputs for 0.04 (MXN 0.796) per kWh for all categories electricity generators and increased by a few (Table 7). Unit costs are constant at USD 0.048 cents/kWh every month. (MXN 0.960) per kWh for the second block, but • During the last three years of Peña Nieto’s the upper limit consumption thresholds vary government, residential tariffs remained at the between 140 and 200 kWh/month. In summer, same level. both prices and thresholds vary significantly • President López Obrador's Administration has between tariffs. indexed tariffs to the inflation rate.

TableTAE 6SUMMER RESIDENTIA EECTRICITY TARIFFS UNE Summer residential electricity tariffs, June 2019

AERAGE TARIFF OC OC OC OC TEM

US MXN US MXN US MXN US MXN

0-75 4.1 0.811 76-140 4.9 0.980 141-250 14.3 2.868 <25°C

A 0-100 3.6 0.715 101-150 4.2 0.840 151-300 14.3 2.868 25°C

0-125 3.6 0.715 126-225 4.2 0.840 226-400 14.3 2.868 28°C

C 0-150 3.6 0.715 151-300 4.2 0.840 301-450 5.4 1.074 451-950 14.3 2.868 30°C

D 0-175 3.6 0.715 176-400 4.2 0.840 401-600 5.4 1.074 601-1000 14.3 2.868 31°C

E 0-300 3.0 0.595 301-750 3.7 0.744 751-900 4.9 0.972 901-2000 14.3 2.868 32°C

F 0-300 3.0 0.595 301-1200 3.7 0.744 1201-2500 9.1 1.810 14.3 2.868 33°C

Source: CFE 2019

S CFE 2019

ENERGY SAFETY NETS | MEXICO CASE STUDY 30 Table 7 TABLE 7: WINTER RESIDENTIAL ELECTRICITY TARIFFS (JANUARY 2019) Winter residential electricity tariffs, January 2019

1st 2nd 3rd AVERAGE TARIFF BLOCK BLOCK BLOCK TEMP.

kWh US¢ $MXN kWh US¢ $MXN kWh US¢ $MXN

1 0-75 4.0 0.796 76-140 4.8 0.960 141-250 14.1 2.813 <25°C

1A 0-75 4.0 0.796 76-150 4.8 0.960 151-300 14.1 2.813 25°C

1B 0-75 4.0 0.796 76-175 4.8 0.960 176-400 14.1 2.813 28°C

1C 0-75 4.0 0.796 76-200 4.8 0.960 201-650 14.1 2.813 30°C

1D 0-75 4.0 0.796 76-200 4.8 0.960 201-1000 14.1 2.813 31°C

1E 0-75 4.0 0.796 76-200 4.8 0.960 201-2000 14.1 2.813 32°C

1F 0-75 4.0 0.796 76-200 4.8 0.960 201-2500 14.1 2.813 33°C

Source: CFE 2019 Source: CFE 2019

Impacts ipality. Tariffs may also be correlated to political affiliations. No comprehensive analysis has been Between 2002 and 2016, the number of house- carried out to determine the degree to which ne- holds that benefited from the subsidized IBT gotiations between municipalities and CFE/SHCP blocks increased from 22 million to 36 million, have resulted in a greater level of subsidy, but excluding high-consumption residential users on there are a number of public declarations by pol- the unsubsidized VDT structure (CFE 2019). iticians promising to deliver this, which suggests this is a common practice (El Universal 2019; El This differentiated tariff structure is not, how- Economista 2019; Reforma 2019). ever, specifically targeted to poor or vulnerable households and may be economically inefficient OPORTUNIDADES ENERGÉTICAS because it subsidizes low-consuming households, regardless of income level. Nonetheless, Background, aims and implementing electricity consumption is subsidized, and poorer agencies households who consume less electricity have a larger portion of their energy needs subsidized For a period of five years (2007–2011), Oportuni- than richer households who tend to consume dades, the broadest and most important social more (Hancevic et al. 2019). safety net operating in Mexico, included an energy component, Oportunidades Energéticas. In The government’s reasoning for tariff design 2007, under the Calderón Administration, Opor- based on climatic variation suggests that the tunidades added a new cash transfer component average temperature should be a key factor in to support household energy costs, in addition to setting a different type of tariff in every munic- ongoing support for nutrition, education, and for

ENERGY SAFETY NETS | MEXICO CASE STUDY 31 elderly citizens. The transfer was designed to help According to Sedesol, individual households households to pay for part of their fuel (LPG) or were identified as beneficiaries ofOportunidades energy service (electricity) costs and compensate within the geographically-selected communi- for the negative impacts that increasing energy ties using a points system. There is no informa- prices would have on households living in pover- tion available regarding how this points system ty. The driver for including an energy component worked nor any evaluation of how – or how suc- was to promote access to modern energy services cessfully - it was implemented. Sedesol only stat- and reduce the use of polluting fuels—such as ed that it was not based on household income firewood, diesel and coal—thereby reducing the but on a local socioeconomic survey that sought associated health risks for households living in to identify those families living in extreme pov- poverty. The energy-specific component ended erty. Throughout the lifetime of the program the when Oportunidades was rebranded as Prospera Oportunidades operating guidelines required following the change of administration in 2012. that its means-testing mechanisms be modified, and that CONEVAL find a more suitable mech- Modalities of Oportunidades anism to better target beneficiary households.vi Energéticas Starting in 2009, CONEVAL’s social backward- ness index was used in the Oportunidades pro- In order to be an Oportunidades Energéticas ben- gram. This used data from the ENIGH to identify eficiary, a household had first to participate in the communities and households lacking access to general Oportunidades program, which required education, health and other basic services and it to be registered in the Sedesol unified benefi- with poor living standards. ciary register (Padrón Único de Beneficiarios). Reg- istration of beneficiaries was initially only available Oportunidades Energéticas, as part of Oportuni- to communities selected by a government-led, dades, was initially envisioned as a conditional geographically based targeting mechanism. cash transfer that required beneficiaries to attend scheduled medical check-ups and periodic com- The geographical selection was based on the munity workshops to promote health practices. marginalization index of the National Popula- However, after the first year the requirements tion Council of Mexico (Consejo Nacional de changed, and it became an unconditional cash Población (CONAPO)), which used the following transfer with only one requirement: presentation criteria (aggregated at community level): literacy of an electricity bill. rate, highest educational level, access to sanita- tion, electricity access, piped water access, level Impacts of overcrowding, existence of concrete floors in houses and the household income level. Once According to Sedesol, Oportunidades supported the poorest and most marginalized communi- 5 million households in 2007, increasing to almost ties were selected, a second filter was applied 5.8 million in 2011. Approximately 90 percent to ensure that those communities selected as of households enrolled in Oportunidades also beneficiaries had local schools and medical clin- benefited from Oportunidades Energéticas, i.e., ics (those that did not have these facilities were between 4.5 million and 5.2 million households removed from the register). The rationale for this received the energy safety net (ESN) throughout exclusion was that beneficiaries would need to go the lifetime of the program. No data are available to a school or clinic to collect the Oportunidades on why only this proportion of Oportunidades benefit, since most individuals lacked access to beneficiaries received Oportunidades Energéti- the formal banking system.v cas. However, the design of the community tar-

ENERGY SAFETY NETS | MEXICO CASE STUDY 32 geting and the requirement to show an electricity percent and 25 percent of a household’s energy bill may be part of the explanation. spending (Table 8). However, although it was intended to help families acquire any energy-relat- The requirement to present an electricity bill pre- ed good or service, no analysis was undertaken vented many households from accessing Opor- to establish whether households in fact used the tunidades Energéticas. This included households support for energy-related consumption. As the who could not prove legal possession of their benefit was a cash transfer, households could use house (including those who were renting or bor- it for any purpose they deemed necessary. rowing a house with no legal paperwork); those with an illegal electricity connection; and those There has been no official evaluation of the im- with no electricity connection at all. pacts of Oportunidades Energéticas. In addition, there are no disaggregated data available that The exclusion of households in these cases sug- could be used to understand the program’s con- gests that Oportunidades did not reach the most tribution to reducing energy poverty. However, marginalized communities (i.e. remote communi- Sedesol carried out a one-time ex-ante external ties without local health and education services evaluation of the energy component of Opor- and/or electricity connections). tunidades (Gertler et al. 2007). Although by its nature such analysis is not conclusive, this econo- One of the most important characteristics of metric analysis found the following: Oportunidades Energéticas was that it only cov- ered a share of the total energy spending of the • the amount of support offered by Oportuni- household mainly aiming to compensate the ben- dades Energéticas did not have a significant eficiaries for price increases of LPG and electricity. impact on the adoption of cleaner energy Depending on the year, the total amount of Opor- technologies or fuels to replace firewood, die- tunidades Energéticas amounted to between 21 sel or coal by domestic users

Table 8 Estimated contribution from Oportunidades Energéticas to monthly household energy costs

2007 2008 2009 2010 2011

MXN 50 55 55 60 60 Oportunidades Energéticas contribution USD 4.22 4.73 3.88 4.60 4.83

MXN 186 191 206 188 201 LPG price (20 kg) USD 16 16 15 14 14

MXN 46.58 47.93 49.73 51.53 53.33 Electricity price (75 kWh) USD 3.93 4.12 3.51 3.95 4.29

Percentage contribution 21% 23% 22% 25% 24%

Source: DOF 2019a; DOF 2019b; CFE 2019b Note: USD values calculated for 2011.

ENERGY SAFETY NETS | MEXICO CASE STUDY 33 • the amount of support did not have a signifi- la Industria Eléctrica (LIE). The LIE stated that the cant impact on the households’ direct spend- federal government will support connection to the ing on energy products and services electricity grid for marginalized rural and urban • the targeting mechanism countered the re- communities and mandated the creation of a Uni- gressive aspect of universal energy subsidies versal Electricity Service Fund (Fondo de Servicio • the ESN had a small impact on helping house- Universal Eléctrico (FSUE)) to deliver this objective. holds to redistribute their spending to other areas such as nutrition or transport, in addition Specific aims and guidelines for the FSUE were to energy. issued in February 2017. These were as follows:

Over the five years the program operated, its 1. Promote electricity access for marginalized ru- burden on government resources was much ral and urban communities at lowest cost using smaller than that of previous general energy clean energy technologies for lighting, com- subsidies. As Table 9 shows, the estimated an- munication and food preservation and provide nual cost of Oportunidades Energéticas (not in- electricity infrastructure for basic healthcare cluding administrative costs) averaged USD 259 and education services, economic activities, million.vii outdoor cultural and recreational public spaces, and community kitchens. FONDO DE SERVICIO UNIVERSAL 2. Ensure the sustainability of basic electricity ELÉCTRICO (FSUE) supply infrastructure. 3. Utilize fund resources with efficiency, effi- Background, aims and implementing cacy, economy and transparency, and seek agencies other co-funding mechanisms for electrification projects in marginalized rural and urban Under Mexico’s Energy Reform of 2013, the elec- communities. tricity sector was opened to competition and the 4. Fund resources are not to be used for street wholesale electricity market was created within lighting, except in the case of outdoor public the framework of a new electricity law, Ley de cultural and recreational spaces.

Table 9 Estimated annual cost of Oportunidades Energéticas

2007 2008 2009 2010 2011

Oportunidades Energéticas 4.22 4.73 3.88 4.6 4.83 (USD per household, monthly)

Number of families 4,500,000 4,544,285 4,688,423 5,237,058 5,244,586 beneﬁting

Total estimated cash transfer 228 258 218 289 304 (USD million)

Source: Gertler et al. 2007 Note: USD values calculated for 2011.

ENERGY SAFETY NETS | MEXICO CASE STUDY 34 When the FSUE was created in 2016, CFE es- Modalities of the FSUE timated the number of communities without electricity to be 41,697, equivalent to 440,000 The FSUE was to be implemented according to households or approximately 1.8 million people. the following guidelines: Almost 31,000 of these communities consisted of one or two households, thus it would not be cost • Use of transparent and competitive mecha- effective to extend the electricity grid to connect nisms to implement electrification projects them. The main regions with communities with- • Active involvement of targeted marginalized out electricity access were identified as Chiapas, rural and urban communities, taking into ac- Chihuahua, Durango, Guerrero, Nayarit, Oaxaca, count the legal frameworks for land ownership and San Luis Potosí (Figure 7). • Use of indicators and monitoring frameworks to assess the progress of electrification in re- To manage the fund, the SHCP contracted the Na- lation to goals established in the 2013–2018 tional Bank for Public Infrastructure Works (BANO- Energy Sector Program BRAS) and allocated MXN 3 million (approximate- • Development of implementation schedule with ly USD 150,000 in 2019 prices to cover managing up-to-date and timely information on progress the program for five years. SENER also stated that • Projects should promote scale-up of the FSUE could generate more resources than infrastructure the CFE budget for electrification. This meant the • Projects should use the operating rules’ priori- FSUE could use funds generated from the man- ty criteria for granting support, including num- agement of losses and differences in transactions ber of homes and degree of marginalization. carried out in the wholesale electricity market.

Figure 7 Locations of communities without access to electricity

Source: SENER 2016a

ENERGY SAFETY NETS | MEXICO CASE STUDY 35 The operating rules required an annual list of tar- In terms of decentralized solutions, the FSUE get communities to be created using information issued three tenders for off-grid electrification provided by local government, the CFE, or those projects by 2018, totalling almost MXN 2 billion companies interested in obtaining FSUE resourc- (or approximately USD 100 Million in 2019). Thir- es for carrying out specified projects. This was to teen contractors were approved to develop the include the total number of houses in the target projects. The funds have been used to create community, the number without access to elec- credit schemes whereby the communities pay for tricity, their approximate distance to the elec- the electricity at a discounted rate or the same tricity grid, the socioeconomic and geographic rate as on-grid customers, usually for rooftop characteristics of the target area, and access, cli- or stand-alone solar home systems. However, in matic or geological risk factors that could impact some communities even the subsidized prices electrification works. are too high, and it appears from the very limited data in media reports that affordability is still a Both grid extension and off-grid, stand-alone barrier to electricity access for some communi- electrification projects could be funded by the ties gaining connections via the FSUE. FSUE. Between 2016 and 2018 three rounds of tenders were issued for grid extension and three In summary, despite the FSUE’s aim of provid- for off-grid schemes (SENER 2018b). ing an ESN to connect users to electricity, there appear to be challenges to delivering the pro- Impacts of the FSUE gram’s intended impact, not least a lack of data. The López Obrador Administration is re-evalu- By mid-2018, the FSUE had provided 42,085 ating the FSUE and its operations are currently connections through the first tender round of on hold. tenders, benefiting 172,349 people. An additional 48,630 connections were authorized in PROVISION OF SUBSIDIZED LPG FOR the second round, and the 2018 tenders were HOUSEHOLD COOKING expected to provide a further 47,878 connections (SENER 2018b). However, there is no con- Background, aims and implementing clusive or rigorous analysis of the impacts of parties the FSUE in terms of reaching poor and marginalized households. For the grid extension In July 2017, during the Peña Nieto Administration, projects, resources were allocated to the state Sedesol and SENER launched a pilot initiative to distribution company CFE Distribución and sell LPG at reduced prices through the Diconsa used to fund the annual grid expansion plan. network of state-owned distribution centers oper- There is no evidence that this plan changed to ating in rural and poor communities. These stores include or prioritize electricity access for poor supply a basic range of goods at controlled prices and marginalized communities, as the LIE in- to improve the nutrition and health of the com- tended, and it is very difficult to assess the ef- munities. Sedesol stated that the subsidized LPG fectiveness of the FSUE resources in promoting program was introduced to reduce firewood and grid access for isolated communities. A further coal usage in homes by promoting the use of effi- constraint is that CFE requires that a communi- cient stoves. However, the pilot ended a year later ty must be a maximum of five kilometers from in 2018. Analysis of the program is hampered by the existing grid as a pre-condition for any grid a complete lack of publicly available information extension project, potentially excluding the regarding its design, implementation, evaluation most marginalized rural communities. and the reasons for its termination. Nonetheless,

ENERGY SAFETY NETS | MEXICO CASE STUDY 36 the following summarizes what is known about this five states where 62 percent of the Mexican popu- short-lived program. lation living in poverty are located: Chiapas (3,376 stores); Guerrero (1,921); México (1,892); Oaxaca Modalities (2,637); and Veracruz (3,910) (Diconsa 2018).

Under the program, Sedesol donated more than The subsidized price of a 10 kg LPG cylinder was 13,000 sets of LPG stoves and 10 kg LPG cylin- set at USD 7.94 (MXN 150) nationally. The amount ders to marginalized families in 15 municipalities of subsidy depended on the public price ap- across 12 states at a cost of MXN 12 million (USD proved by the regulator and varied depending 600,000 in 2019 prices) (Sedesol 2017b, 2017c). on the state. Nonetheless, the subsidy was con- During the pilot, Diconsa shopkeepers provid- siderably lower than that for the other 23 goods ed space for LPG distributors in exchange for a because LPG was considered a non-basic good. share of the profits from the sale of replacement LPG cylinders (CFCE 2018). No information is Impact available about which federal entities or municipalities benefited from this scheme, how they The only three sources of information about were selected or whether the beneficiaries were this program are a 2017 report from Sedesol households living in poverty. (Sedesol 2017c), news articles and statements from Sedesol and SENER Ministers (Sedesol The LPG program had an indirect primary target- 2017b), and interviews with key informants. The ing mechanism. Diconsa stores (Box 5) are located first two sources of information give no additional in communities that are classified as marginalized, details to those already provided. Key informant vulnerable or poor and that are typically small, ru- interviewees for this case study remembered ral settlements with fewer than 15,000 inhabitants. the program but were unable to provide more The stores cover a beneficiary population of 20.7 detailed information about its implementation. million people and are found nationwide (Diconsa Thus, it is unknown how much LPG was sold under 2018). However, the stores are concentrated in the the program or what its cost or impacts were.

Box 5: Diconsa

Diconsa functions as a general social safety net Diconsa stores sell goods such as cotton, torti- that focuses on improving nutrition and health llas, phone cards, toys and clothing in addition conditions for families living in poverty. It coor- to energy-related goods like firewood, charcoal, dinates the sale of subsidized basic goods using matches, lighters, light bulbs, flashlights and a 27,000-strong state-owned grocery store net- candles (Diconsa 2019). The sale of these goods work located in rural and marginalized communi- may reflect the energy consumption needs of the ties. There are 23 reduced-price basic goods that communities where the shops are located, but can be purchased at less than half market price, further research would be required to confirm with an overall 35 percent subsidy of those goods this assumption. in 2018, compared to a commercial retail store.

ENERGY SAFETY NETS | MEXICO CASE STUDY 37 In summary, the program used the geographi- poor, and vulnerable households to access cleaner cal targeting of an existing social safety net and cooking energy sources. However, little is known attempted to provide support for marginalized, about its actual operation and effectiveness.

Figure 8 Distribution of Diconsa stores

Source: Diconsa 2016

Table 10 LPG subsidies through Diconsa stores by state

STATEViii AVERAGE PRICE DISCOUNTED PRICE BENEFIT BENEFIT PERCENTAGE

USD MXN USD MXN USD MXN

Guerrero 9.10 172 7.94 150 1.16 22 12.9%

Michoacán 9.10 172 7.94 150 1.16 22 12.9%

Veracruz 8.99 170 7.94 150 1.06 20 11.8%

Jalisco 8.94 169 7.94 150 1.01 19 11.5%

Yucatán 9.05 171 7.94 150 1.11 21 12.3%

Morelos 8.73 165 7.94 150 0.79 15 9.1%

Chiapas 8.73 165 7.94 150 0.79 15 9.0%

Campeche 8.62 163 7.94 150 0.69 13 8.0%

Hidalgo 8.62 163 7.94 150 0.69 13 7.9%

México 8.62 163 7.94 150 0.69 13 7.8%

Oaxaca 8.52 161 7.94 150 0.58 11 6.8%

Ciudad de 8.52 161 7.94 150 0.58 11 6.8% México

Tabasco 8.41 159 7.94 150 0.48 9 5.2%

Source: Sedesol 2017b, 2017c

ENERGY SAFETY NETS | MEXICO CASE STUDY 38 CONCLUSIONS

ENERGY SAFETY NETS | MEXICO CASE STUDY 39 This case study aimed to answer four overar- a rigorous targeting mechanism, there has ching questions that steered this research and been little published analysis of the program’s informed the data collection methods used. effectiveness. The conclusions below are therefore structured around these four questions. 3. The FSUE was set up in 2013 to provide subsidies for electrification projects providing Policy Measures access to isolated rural and urban communities. It used an income poverty and remote- Energy access and energy poverty are becoming ness-based targeting mechanism. Both grid more important as concepts discussed in Mexi- extension and off-grid projects were included, can energy policy. Recently, energy poverty and with the latter providing consumer credit and marginalization were referenced in the López in some cases subsidized electricity prices. Obrador Administration’s central planning doc- There has been little analysis of its effective- ument, Plan Nacional de Desarrollo (National ness and it is currently on hold pending review. Development Plan). Nevertheless, the concepts rarely not defined or accompanied by any specif- 4. A short-lived provision of reduced-price LPG ic criteria or metrics to facilitate their comprehen- used a geographically based poverty target- sion and measurement. Energy Safety Net (ESN) ing mechanism, as part of a wider program of is a new concept that requires further explana- subsidized goods provision using the Diconsa tion in order to be understood by stakeholders. store network. Unfortunately, there is no evidence about the modalities and effectiveness Notwithstanding these conceptual issues, this of implementation, impacts, operating cost research highlighted four different measures in or beneficiaries. The program was a pilot and Mexico that fit the definition of an ESN: differ- only lasted 18 months, from July 2017 to De- entiated electricity tariffs, Oportunidades cember 2018. Although a report of the Comis- Energéticas, the Fondo de Servicio Universal ión Federal de Competencia Económica (2018) Eléctrico (FSUE), and reduced-price LPG. To recommended expanding the scheme to all summarize the findings on each ESN: Diconsa stores, this has not taken place and the reasons it was terminated are unclear. 1. Differentiated electricity tariffs are a broad subsidy with a self-targeting mechanism that Effectiveness Of Energy Safety Nets only subsidizes a basic amount of electricity, thus promoting access to a minimal level of The four ESNs analyzed are similar in that they consumption. Nevertheless, there is no clear are not programs that fully support households’ rationale for why this minimum level has been spending in energy goods and services. They are set at 75 kWh per month and there has been designed to cover only a portion of the cost of en- no evaluation to determine how effective the ergy goods and services for those who most need subsidized tariff is in reducing energy poverty. support. The LPG distribution through Diconsa subsidized an average of 9 percent of the total 2. Oportundiades Energéticas was a five-year cost of the LPG cylinder. Oportunidades Energéti- program that operated as an energy compo- cas supported around 25 percent of families' to- nent of a wider social safety net. Reducing tal expenditure on energy goods and services. energy poverty was not the only driver for FSUE subsidized grid or electricity access for the the program; it was also aimed at substitut- target households but to an unknown extent. On ing polluting fuels with cleaner fuels. Despite average, the subsidized tariff structure meant

ENERGY SAFETY NETS | MEXICO CASE STUDY 40 that Mexican households paid 46 percent of the the program excluded households who were full cost of their electricity consumption in 2015, not connected to the electricity grid who were with subsidies covering the remaining 54 percent. likely to be less well off. This support was more significant for the poorest households. For households in the lowest expen- There is little analysis of the FSUE’s impacts, but diture decile the electricity subsidy was equiv- it seems to have had mixed results. On the one alent to 4.2 percent of their total expenditure, hand, it does not appear to have promoted access compared with 0.3 percent for the highest decile via grid extension because its resources were sim- (Hancevic et al. 2019). ply added to the budget of the state electricity utility whose plans were not amended to prioritize In terms of their success in effectively enabling access for poor and marginalized communities. the poorest social groups to access and use On the other hand, off-grid electrification proj- modern energy services, the four ESNs have had ects have increased access by poor and remote different results. communities with subsidized electricity access, although affordability remains a barrier in some cas- Regarding discounted electricity tariffs, the elec- es. One repeated comment made by stakeholders trification program in the 1970s and the IBT and during interviews was that any new FSUE initiative VDT might have a positive impact in enabling the should be widened to support not only access to poorest social group to access and use modern electricity but to clean cooking for the poorest energy services. However, this is an appropriate and most vulnerable in rural and urban areas. moment for the Mexican authorities to review the methodology used to set the lifeline block of It is not possible to evaluate the impacts of the consumption per household—which dates from fourth ESN, the reduced-price LPG program, in the 1970s—and potentially change the level at terms of enabling the poorest social groups to ac- which minimum consumption is set. Despite the cess and use modern energy services and replace availability of more energy-efficient appliances coal, firewood and diesel for cooking. There is not and lighting equipment, minimum energy con- enough evidence to know if the pilot program in in sumption has grown in real terms due to an in- the 12 communities to which it was introduced was crease in the ownership of electronic devices per successful nor any factors that may have impact its capita. There is a need to identify an acceptable success. In addition, as it was terminated for un- minimum threshold for household electricity con- known reasons in 2018, it is difficult to understand sumption and explain clearly how this relates to if the program could be scalable. satisfying households’ basic needs. Linkages to Social Assistance It is difficult to evaluate how wellOportunidades Programs Energéticas contributed to improving energy access for poor and vulnerable households be- The discounted electricity tariff and FSUE ESNs cause no impact evaluations were conducted. A were not linked to other social assistance pro- one-off report found that the program did not grams. The former is a SHCP–CFE budget allo- have a significant impact on alleviating energy cation mechanism that is negotiated every year poverty, nor did it help to promote the substi- and is a universally available subsidy not currently tution of coal, diesel or firewood with cleaner tied to an existing social assistance program. The cooking fuels because the cash transfer was FSUE was also not linked to any wider social as- insufficient to incentivize households to shift to sistance program but a specific income poverty cleaner energy sources. In addition, by design and remoteness targeting mechanism was used.

ENERGY SAFETY NETS | MEXICO CASE STUDY 41 The other two ESNs have close linkages to oth- The energy policy reforms in 2013 mandated SEN- er social assistance programs. Oportunidades ER, SHCP and Sedesol with the help of CRE and Energéticas was a component of a bigger social CONEVAL to deploy a targeted social assistance safety net, Oportunidades. To be eligible for program to support timely and adequate access to Oportunidades Energéticas, households had to energy at affordable prices for vulnerable groups be part of the Oportunidades program. Registra- of users. Further analysis would be needed on the tion was initially only available to communities se- specific policies and measures that could most ef- lected through a government-led, geographical- fectively implement such a program. This would ly based targeting mechanism. Subsequently the include further research on the four schemes ex- program was made available across the whole amined in this case study, analysis of the as-yet-un- country with every new applicant undergoing implemented tariff reforms proposed in 2013, and means testing. international best practice for ESNs.

In the same manner, the sale of LPG at a reduced ESNs in Mexico currently support access to electrici- price through Diconsa stores took advantage of a ty. Subsidized tariffs enable the poorest to consume wider program that geographically targeted the electricity and FSUE supports connections in un- poorest and most marginalized communities to connected isolated communities. While the current distribute subsidized basic goods needed mainly discounted tariffs support the consumption of elec- for nutrition and health purposes. tricity by poor households, they are also regressive and improved targeting could substantially reduce Improving Energy Safety Nets the drain on public finances. One suggestion to reduce the fiscal burden is to extend coverage of the It is difficult to judge how effectively the four mea- DAC tariff to the top quintile of electricity consumers sures supported energy access because there in each tariff category (Sánchez et al. 2018). Anoth- has been little assessment of their impact. There er suggestion for tariff reform that might improve is an absence of evidence to support proposals targeting is to apply VDTs at all consumption lev- for changes in their design or operation to im- els (IEA 2016). Adjusting the monthly consumption prove support for energy access for the poorest threshold to a level that matches the consumption and most marginalized people in Mexico. Previ- of poor households or limiting subsidized tariffs to ous changes to these measures were driven more households eligible for social assistance could bet- by political expediency than empirical evidence. ter target this support to those who need it most.

ENERGY SAFETY NETS | MEXICO CASE STUDY 42 RECOMMENDATIONS

ENERGY SAFETY NETS | MEXICO CASE STUDY 43 Mexico has a new political climate following the ble households. The promotion of access to 2018 election of the López Obrador Administra- off-grid electricity through the FSUE focus- tion. The electricity sector continues to operate es on isolated communities. Access to clean under the previous, pre-2013 reform framework cooking in rural and urban areas remains a and it is unclear if, how or when the framework challenge for low-income households, which might change. Although further research and could be addressed through the modalities of analysis are needed to improve understanding of the FSUE. the differential impacts on energy access and use of energy subsidies, energy safety nets (ESNs) • Subnational governments and agencies and social assistance programs in Mexico, several should be involved in the design of ESNs. recommendations emerge from this study: Energy poverty is more visible in some states and municipalities than others, and region- • Electricity tariff subsidies should be target- al differences in energy poverty need to be ed to poor households. To assist this, the Min- better understood. Subnational governments istries of Energy (SENER) and Welfare (Biene- should be encouraged to measure and period- star) should collaborate to design a method ically evaluate levels of energy poverty in their that determines minimum consumption levels jurisdictions and be involved in the targeting for electricity and cooking fuels. This could be of beneficiaries for ESNs. used to revise the threshold level for DAC tariffs or determine eligibility for subsidized tar- • Further research should be undertaken to iffs. Energy consumption should be measured inform energy policy reforms and the de- in national surveys (e.g. ENCEVI and ENIGH) to sign of ESNs. This should include research support the implementation of targeted tariff on the impacts of ESNs and social assistance subsidies. on energy access and use, the energy-poverty-gender nexus in Mexico and how energy • The scope of the FSUE should be widened access and ESNs can be integrated in other to support access to clean cooking tech- energy-related mechanisms and policies (e.g. nologies for the poorest and most vulnera- FIDE, Hipoteca Verde and Solar Bonus).

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Endnotes i ENIGH is conducted every two years. At the time of writing, the 2018 survey had been conducted, but its results had not yet been published. The most recent results available are from ENIGH 2016. ii ENCEVI was published for the first time in 2018. There is no information on what its periodicity will be. iii A society that scores 0.0 on the Gini scale has perfect equality in income distribution. The higher the number over 0, the higher the inequality. A score of 1.0 indicates total inequality, where only one person in a community has an income. iv The United States by comparison has a Gini coefficient of 0.391; Canada scores 0.307, indicating less disparity between the wealthiest and the poorest. v One of the main criticisms of the targeting of beneficiaries under the Oportunidades system was that it excluded communities without health and education facilities. See: http://archivos. diputados.gob.mx/Centros_Estudio/Cesop/ISSSTE_2.pdf. vi Prior to the creation of CONEVAL, CONAPO, as the public institution that measured poverty in Mexico, did not use the INEGI national survey of income and expenditure (ENIGH) but its own methodology using data from the Population and Housing General Census. vii Calculations made using data from Sedesol (2017a), Banco de México (2019) and Gertler et al. (2007). These are not official figures.

ENERGY SAFETY NETS | MEXICO CASE STUDY 49 GLOSSARY

Centro Latinoamericano International organization created to promote the modernization of de Administración para el public administration and state reform in Latin-American countries. Desarrollo

Comisión Federal de State-owned electricity company. Until 2014 CFE enjoyed a legal Electricidad monopoly. It remains the sole operator of the national transmission and distribution lines and the only company that operates as a residential supplier.

Consejo Nacional de Independent government body responsible for measuring poverty Evaluación de la Política and the evaluation of welfare policies and programs. de Desarrollo Social

Compañía Nacional de State-owned company created in 1961 to regulate and control prices Subsistencias Populares of basic goods. In 1999 it became part of Diconsa.

Consejo Nacional para Government agency responsible for the promotion of efficient use of el Uso Eficiente de la energy. It depends entirely on the Ministry of Energy (SENER). Energía

Distribuidora y State-owned retail store network established to sell basic goods in comercializadora S.A. rural and poor communities.

Encuesta Nacional Ingreso National survey launched in 1992 by INEGI to collect data about the – Gasto de los Hogares income sources and expenditure of Mexican households. It is carried out every two years and the results are presented the following year.

Encuesta Nacional sobre National survey launched in 2018 by CONUEE to obtain more in- Consumo de Energéticos depth information regarding energy consumption patterns in Mexi- en Viviendas Particulares can households.

Fideicomiso para el Created as a trust to promote access to efficient electric appliances Ahorro de Energía for households through credits that were recovered using CFE bills, Eléctrica it later became an autonomous organization.

Fondo de Servicio Fund created to promote electrification for unconnected Universal Eléctrico communities.

Impuesto Especial sobre Tax that levies substantial federal excise rates on the sale of certain Producción y Servicios taxable items, such as gasoline, beer and tobacco.

ENERGY SAFETY NETS | MEXICO CASE STUDY 50 Instituto Federal Electoral Autonomous, public organization responsible for organizing federal (IFE) elections in Mexico. It was replaced by the INE in 2014 as a result of a series of reforms.

Instituto Nacional Autonomous, public organization responsible for organizing federal Electoral (INE) elections in Mexico. It replaced the IFE in 2014 as a result of a series of reforms.

Instituto Nacional de Autonomous government agency dedicated to coordinating the Na- Estadística y Geografía tional System of Statistical and Geographical Information. It is re- (INEGI) sponsible for performing several censuses and surveys and for gath- ering and processing other statistical information.

Ley de la Industria Legal framework for the Mexican electricity sector after the energy Eléctrica reform. It was enacted in August 2014.

Movimiento de Mexican political party founded by Andrés Manuel López Obrador, Regeneración Nacional the current President of Mexico. In 2018 it became the country’s rul- ing political party.

Partido Acción Nacional Mexican political party that governed under two administrations between 2000 and 2012.

Partido Revolucionario Mexican political party in power from the 1930s until 2000 when it Institucional lost the elections. Returned to power in 2012 under Enrique Peña Nieto.

Petróleos Mexicanos State-owned oil & gas company. Until 2014 the company enjoyed a (PEMEX) legal monopoly.

Secretaría del Bienestar Formerly known as Sedesol, Bienestar is the Ministry of Welfare, the government body responsible for the oversight of welfare programs and poverty reduction strategies.

Secretaría de Energía Ministry of Energy

Secretaría de Hacienda y Ministry of Finance Crédito Público

Tarifa Doméstica de Alto Most expensive electricity tariff in Mexico. It penalizes households Consumo (DAC) that consume more than regionally-defined thresholds.

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