Mexico could cap LPG prices as soon as tomorrow

Mexico's energy regulatory commission (CRE) could publish the first set of LPG retail price caps since the 2014 energy reform as soon as tomorrow after it published the methodology in the official gazette.

The formula to set maximum LPG prices will be published every Saturday, which will be made up of an average sale price, logistics costs, profit margin and an adjustment based on different market conditions known as the K-factor.

The CRE published the methodology late yesterday, without changes, a few hours after it sent it to the regulatory improvement agency (Conamer). There was no public comment. The project was fast tracked — although there is no official process for such an acceleration — as such changes usually take up to two months to be published in the official gazette from when they are sent to Conamer.

The final version underscored the government's arguments to cap prices, such as the need to protect final LPG users from "abusive prices," avoid unnecessary price discrimination and promote "fair" profit margins for the distributors.

The commission said LPG prices rose by 16.7pc in 2020, well above the 3.2pc annual inflation rate — which violated the presidential promise of not allowing fuel prices to rise by more than inflation.

The commission also said that prices rose by 46pc in December since December 2016, the last month when LPG prices had a government-set ceiling. The CRE argued that retail prices for consumers always rose in line or even more than international prices, but did not fall in the same proportion.

The change could be subject to injunction requests in the courts from market participants, the CRE acknowledged in the publication. Challenges and injunctions to this ruling are likely to come quickly, energy lawyer Diego Campa with the Campa Mendoza firm said.

By Sergio Meana