Consumer empowerment: the consumer´s role in energy markets

May 15, 2012

Presented by:Bernardo Altamirano Rodríguez

Federal Consumer AttorneyConsumer Protection Federal Agency (Profeco)

STRIKING A BALANCEIN THE MIDST OF CHANGE

May 13-16, 2012Québec City, Québec (Canada)

PROBLEM

Marketplace

• Development of energy markets

• Increased of private investment in supply issues

• Tendency to reduce subsidies

Consumer

• Strengthening protection via prevention

• Impact on regulation

• Social engagement mechanisms for audit

Electricity

Consumer Protection

There are 28.6 millions of homes around Mexico. 98.2% have electric services.

1970 1990 2000 2005 20100.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

58.9%

87.5%95.4% 97.5% 98.2%

Percentage of Homes with Electric Services

Source: INEGI, Populations census 1970, 1990, 2000 y 2010

Marketplace Context

Regulatory Framework

Political Constitution of the United Mexican States• Only the Nation carries out the activities to generate,

conduct, transform, distribute and supply electricity. There are no concessions to private stakeholders.

Electricity Public Service Law• The State supplies electric services through the Federal

Electricity Commission (CFE). Mexican Official Standard (NOM’S)

• Safety of electrical installations, efficiency in energy system.

Consumer Protection

Economic Effects of Regulation• State monopolized service.• There is no competition between particulars.• Limited protection of consumer´s rights.

Consumer Protection Scope• Submission of complaints and denunciations before

Profeco• Continuity of service during the complaint process at

Profeco.

Profeco’s Action

2006 2007 2008 2009 2010 20110%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

6,419

7,813

6,348 6,590

11,157

14,17473%

60%

67%

75%78%

80%

Number of Complaints and Percentage of Settlement

Perc

enta

ge o

f set

tlem

ent

Num

ber o

f com

plai

nts

On 2011, there were 14,000 complaints. It means that 5 out of 10,000 homes had irregularities in the electric service.

The last year were settled 8 out of 10 cases in favor of consumers.

Prospective

Spread of information about electric consumption in the Consumer Website.

Alliance with the service supplier (CFE) to quickly handle complaints.

Preventive protection scheme through adhesion contract registration.

Gasoline

Consumer Protection

Marketplace Context

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

4,7385,139

5,5646,166

6,7327,172

7,5548,057 8,351 8,556

9,106

Number of Gas Stations in Mexico

YearInternal Sales of Automobile Fuel

(Tbd*)

2007 760.9

2008 792.6

2009 792.4

2010 802.2

*Tbd: Thousands of Barrels per DaySource: PEMEX Annual Report, 2011 http://www.ri.pemex.com/files/content/pemex%20Anuario_a.pdf

Marco Regulatorio

Political Constitution of the United Mexican States• Only the Nation can exploit natural resources, such as oil and its

derivatives, without franchising.

Regulatory Law for the 27th constitutional article about Oil Sector• Private capital investment for fuel distribution (Gas Stations)

Mexican Official Standard (NOM’S)• Specifications for measurement instruments aimed at the proper sale.

Consumer Protection

Economic Effects of Regulation• State monopolized exploitation through the state-owned company

PEMEX.• Private capital investment for distribution through franchises schemes.• Administrative verification of distributors.• Complex consumer protection.

Consumer Protection Scope• Verification of Gas stations and calibration of dispensers• Submission of denunciations before Profeco and Gas station Traffic

Light.• Fines application, suspensions and closures.

Consumer Protection

2007 2008 2009 2010 20119,000

9,500

10,000

10,500

11,000

11,500

12,000

12,500

75.00%

80.00%

85.00%

90.00%

95.00%

100.00%

10,907

11,408 11,420

10,169

12,177

90.67%

94.52%95.62%

83.37%

97.00%

Annual Verifications carried out by Profeco

Num

ber o

f ver

ifica

tions

Perc

enta

ge re

spec

t the

regi

ster

Year Fine Amount$USD

2007 $631,856.37

2008 $2,330,466.9

2009 $5,627,187.6

2010 $ 1,547866.1

2011 $1,161,071.7

Prospective

Transparency in the verification activities and outcomes.

Information mechanisms as the Traffic Light and its mobile application (app).

Promotion of the denunciation culture against suppliers.

Technical standard that incorporates cutting edge technology for dispensers.

Liquefied Petroleum Gas

Consumer Protection

Marketplace Context

Year Number of Plants

2007 1,319

2008 1,343

2009 1,343

2010 1,353

2011 957

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2.14

2.77

3.964.21

3.72

Domestic Sales Amount of L.P. Gas (B, US Dollar)

Regulatory Framework

Political Constitution of the United Mexican States• The Nation has the domain of all natural resources such as fossil

fuels (solid, liquid, gas).

LP Gas Regulation• Regulation of the licenses for transportation, storage and distribution

of LP Gas; first-hand sales and final-users sales.

Mexican Official Standard (NOM’S)• Technical and safety specifications for containers, test methods for

net content of cylinders and measurement instruments.

Consumer Protection

Economic Effects of Regulation• Licenses for LP Gas storage, transportation and distribution, granted by the

Ministry of Energy.• Concurrent competences.• Regulation through contracts for «Fist-hand sales» by Pemex and state-

regulated prices.• Preventive consumer protection through plants and vehicles' verifications.

Consumer Protection Scope• Verification of LP Gas plants and transports.• Submission of complaints and denunciations before Profeco• LP Gas meter calibration • Penalty administrative proceedings and fines application

Profeco’s Action

2007 2008 2009 2010 20110

1,000

2,000

3,000

4,000

5,000

6,000

1,287 1,213 1,047 1,036

1,836

5,559

2,725

2,0791,808

3,3423,067

1,486

2,226

1,799

3,504

Plants, Vehicles and Tanks Verifications

Plantas Vehículos Auto-tanques

Year Fines$USD

2007 $5,739,953.6

2008 $10,821,555

2009 $6,672,151.6

2010 $2,519,299.8

2011 $1,227.990.3

Prospective

Transparency in verification functions

Spread of verification outcomes through the Consumer Website

Promotion of a smart consumption and denunciation culture

Revision and strengthening of the technical standards to be fulfilled by suppliers

Natural Gas

Consumer Protection

Marco Regulatorio

Political Constitution of the United Mexican States• The Nation has the domain of all the natural resources such as fossil

fuels (solid, liquid, gas).

Natural Gas Regulation• First-hand sales and activities that are not part of the petroleum

industry on natural gas matter, to assure its efficient supply.

Mexican Official Standard (NOM’S)• Safety requirements for the exploitation and distribution facilities

through pipelines.

Consumer’s Protection

Economic Effects of Regulation• Trunk distribution by Pemex – Local distribution concession, upon

demand.• Competence among distributors to end users.• Consumer protection through the reception of complaints, settlement

and advice.

Consumer Protection Scope• Advice on hiring and contract terms• Spread of information about businesses behavior• Submission of complaints and settlement procedure before Profeco• Penalty administrative proceedings and fines application

Prospective

Spread of information on complaints and proceedings at the Consumer Website

MoU with the Energy Regulatory Commission (CRE) in order to generate information to foster a smart consumption.

Service providers bond to a scheme for an expeditious attention to consumer complaints through the on-line alternative dispute resolution (Concilianet)

Conclusions

Consumer Protection

Consumer Protection in Regulated Markets

Consumer protection schemes differ from the changes in the competence structure of the marketplace.

Profeco acts via “prevention” through verification activities for the fulfillment of the Mexican Official Standards regarding the energy sector.

It also attends users through receiving complaints against suppliers and carrying out settlement procedures.

Profeco bets for providing consumers with information through the Consumer Website and smartphones applications (apps).

Thank you!

@beraltamirano@profeco

www.profeco.gob.mxwww. Consumidor. gob.mx