Heat Wave and Yucatan Blackout Nearly Double Mexico’s Wholesale Power Prices

Mexico City — Large industrial and commercial electricity users across Mexico could soon face steeper bills after a heat-driven surge in demand and the fallout from the Yucatan Peninsula blackout nearly doubled wholesale power costs in just two weeks.

The average Local Marginal Price (PML) in the Wholesale Electricity Market (MEM) reached 1,674.63 pesos per megawatt-hour between August 30 and September 5, a 95.5 percent jump from the 856.69 pesos recorded between August 16 and 22, according to data from the National Energy Control Center (CENACE).

Energy expert Guillermo García Alcocer said the increase affects users who account for between 10 and 15 percent of the country’s total consumption.

The impact depends on which buyers are exposed to the spot market and which hold contractual coverage, he added.

“Households or small businesses do not see the PML directly on their bill. The higher cost can end up affecting suppliers’ costs and eventually subsidy needs, but there is no immediate transmission,” García Alcocer said.

Users and suppliers in an open position are the most exposed, he explained, because they must buy energy to cover their shortfalls in the short-term market at the spot price.

Eddy Saúl González, a specialist in the wholesale market, said the immediate impact will show up on bills, though averaged across the year it would amount to 10 to 15 percent.

He said the rise in the PML stems from higher demand and mainly affects users on the Yucatan and Baja California peninsulas.

“Demand has spiked compared with last year. On August 27, the National Interconnected System logged its second-highest demand on record, at more than 50,000 megawatt-hours, and on top of that CENACE has reserved generation from hydroelectric plants,” he said in an interview.

According to CENACE, in the first week of September thermoelectric plants — which run on natural gas and fossil fuels — supplied 72.48 percent of energy, while renewables contributed just 7.85 percent.

The country’s highest energy prices were recorded in the Carmen load zone in Campeche and in Cozumel, Quintana Roo, just days after the blackout, hitting historic highs of between 11,000 and 13,000 pesos per megawatt-hour.

González estimated that the roughly 30 percent of wholesale market participants without coverage contracts will be hit hardest.