Mexico publishes LPG price cap methodology

Mexico's energy regulatory commission (CRE) sent its proposed methodology to cap retail LPG prices to the regulatory improvement agency (Conamer), a necessary step before any law is published in the official gazette.

The methodology, which could be published as soon as tomorrow in Mexico's official gazette, uses a formula that adds an average sale price, a logistics cost, a profit margin and a K-factor. The average sales price will be taken directly from what retailers report to the CRE.

The CRE will divide the country into 145 regions, the same that were used before price caps were lifted in on 1 January 2017. The CRE will publish the weekly maximum prices for each region every Saturday, which will be valid starting the next day, Sunday.

The CRE justified the price caps using arguments from a study conducted by the competitive watchdog (Cofece) in June 2018, as well as citing accusations of possible malpractice and monopolistic activities made by the Cofece to the CRE. But it made no reference to Cofece's more recent calls, made just yesterday, to stop the price cap plan, or of warnings that capping LPG prices might end up hurting consumers even more.

The CRE today at 6:30pm ET held an extraordinary plenary session with all of its commissioners in which it approved the methodology.

Historically, and by law, new rules need to be sent to Conamer for a public comment period. But the current administration has full control of Conamer, leading critics to accuse it of no longer acting as an independent entity and more like a rubber stamp in the process of changing laws in Mexico.

Alberto Montoya, former deputy director of the energy ministry (Sener) under Rocio Nahle, is the head of Conamer, which has granted exceptionally swift approvals to changes in energy law requested by Montoya's former boss.

The publication follows the request made by Sener to CRE to act immediately and formulate a price cap methodology, as high prices derived mainly from increases in international benchmarks have impacted the Mexican population.

But the process has skipped rules that require a review and ruling from Cofece that there are no competitive conditions in a market in order for the government to cap the price of any product.

By Sergio Meana