Skyrocketing electricity prices in Baja California will cause companies to close, jobs and investment to be lost and send the cost of living through the roof, business groups warn.
They say that even security could become worse as a result of Federal Electricity Commission (CFE) rate hikes between 200% and 300% since the end of November in the northern border state.
There are two main reasons behind the sudden price hike.
First, the state’s electricity network is not connected to the rest of the country and second and most significant, the Energy Regulatory Commission (CRE) introduced a new pricing model in December.
In a press conference held Wednesday in Tijuana, the presidents of three business organizations said the prices of consumer products and services could go up by as much as 40% as a result of the escalating power costs.
The business leaders took aim at President Enrique Peña Nieto and Finance Secretary José González Anaya, labeling statements by the two that power prices wouldn’t go up as deceitful. They also presented electricity bills from local businesses to emphasize the extent of the increase.
Metalwork company Aluminio de Baja California paid just over 2.4 million pesos (US $126,000) for its energy consumption between October 31 and November 30, 2017. However, its bill for December came in at almost 4.4 million pesos (US $231,000) even though it used less power.
Hot tub manufacturer Jacuzzi de México experienced a similar hike.
It was charged just under 669,000 pesos for its energy consumption in November but just over 1.2 million pesos for December. It too used less power in the latter month.
Small businesses suffered even bigger increases in percentage terms, with monthly costs for some going from 15,000 pesos to 50,000.
The president of the National Chamber for Industrial Transformation (Canacintra) stressed that the price increase will inevitably be passed on to consumers.
“This issue is not exclusive to the industrial sector because at the end of the day, the rise in the electricity rate is going to have an effect on the goods and services that you consume every day,” Marcello Hinojosa Jiménez said.
“. . . It will cause the closure of companies, paralysis of new investment, mass dismissals, unemployment and insecurity . . .” he added.
The president of the Otay Mesa Industrial Association said that energy is one of the five biggest expenses for companies and combined with other factors, the increase will likely have an impact on investment.
“The gas increases, electricity increases and what we’re going through now with the negotiations with our northern neighbor, obviously that places us in a more worrying [and difficult] situation to make our state look like a competitive one for foreign investment,” Salvador Díaz González said.
The head of Index, a manufacturers’ association, said more than 600 companies and around 300,000 jobs were placed at risk by the rate hike and urged those responsible to reconsider.
“The CFE has to look at the consequences of this decision and the CRE as well . . . because otherwise there will be an escalation of prices,” Luis Hernández González said.
Through the state government, the leaders are seeking a meeting with CRE director Guillermo García Alcocer to better understand how the new rates were established. They are also considering legal action.
They warned that if the new rates remain, companies could leave Baja California and head to parts of the country where electricity prices are more competitive, such as the Bajío region.