Driving Performance at Mexico's ASEA, CNH and CRE - The Governance of Regulators KEY RECOMMENDATIONS - OECD.org
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The Governance of Regulators Driving Performance at Mexico’s ASEA, CNH and CRE KEY RECOMMENDATIONS
INDEX Driving performance of Mexico’s energy regulators 1 2013 structural reforms in Mexico 2 Mexico’s energy regulators 4 Review findings and recommendations 6 Roles and objectives 6 Input 10 Process 14 Output and outcome 18 Regulators, performance and the delivery of public services 22 Performance Assessment Framework for Economic Regulators (PAFER) review process 24 Network of Economic regulators (NER) 25
DRIVING PERFORMANCE OF MEXICO’S ENERGY REGULATORS . 1
DRIVING PERFORMANCE OF
MEXICO’S ENERGY REGULATORS
This brochure presents the key findings and recommendations of the
Performance Assessment reviews of the Mexican energy sector’s three
regulatory agencies (Agency for Safety, Energy and Environment, ASEA;
National Hydrocarbons Commission, CNH; and Energy Regulatory Commission,
CRE), focusing on the regulators’ internal governance. The reviews follow the
publication of a report on the external governance of the sector (OECD, 2017a).
The review of external governance noted the reform. The reviews put forth a series of
need to enhance institutions and processes recommendations, summarised in this
that, upstream, strengthen role clarity, brochure, to activate an integrated system of
co-ordination and planning in a new and energy regulators and support organisational
complex institutional context, and, change within the three agencies.
downstream, instate accountability for
agreed objectives and results. Together, the four reviews constitute a
comprehensive body of work on the regulatory
The parallel reviews of ASEA, CNH and CRE governance of Mexico’s energy sector and
find that it is critical to enhance internal propose important recommendations to
governance systems across the three bolster future work of the regulators at a
regulators so that they are fully equipped to critical moment in the implementation of the
support the implementation of the energy country’s 2013 energy reform.
2 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
2013 structural reforms in Mexico
The government of Mexico, led by President Enrique Peña Nieto, launched a major structural reform in
2013 to modernise several key areas of the country’s economy, including the energy sector. The reform
restructured the oil and gas industry and opened access to the country’s hydrocarbon resources to
national and foreign, public and private entities, and further opened the electricity sector to private
participation.
The reform aimed to increase sector investment and government revenue for the benefit of all Mexicans,
as well as to make Mexico a global leader on environmental issues by embedding clean energy targets in
legislation. In the power sector, it sought to place downward pressure on prices, facilitate the transition to
renewable sources of energy and extend electricity coverage.
Far-reaching modifications were made to the institutional framework with regard to sector regulation,
with the strengthening of existing regulators and the creation of new ones (see Figure 1).
Figure 1. Overview of institutional arrangements, pre- and post-reform
Pre-reform
2013 SHCP
(Ministry of Finance)
Secretaries
(ministries) CRE
SENER
(Ministry of Energy)
CNH
Executive branch
PEMEX
Deconcentrated
entities
CFE
Policy maker
Regulator
Operator
Financial entity
Source: Adapted from CRE.
DRIVING PERFORMANCE OF MEXICO’S ENERGY REGULATORS . 3
Bank of Mexico Mexican Oil Fund
SHCP
(Ministry of Finance)
Secretaries SENER
(ministries) (Ministry of Energy)
SEMARNAT ASEA
(Ministry of
Environment) (Safety & EP Agency)
Post-reform CENACE
(Electricity market
2013-14 ISO)
Deconcentrated
entities
CENAGAS
(Gas market ISO)
Executive branch
PEMEX
State-owned
productive
enterprises
CFE
CRE
Co-ordinated
energy regulators
CNH
4 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
MEXICO’S ENERGY REGULATORS
AN INTEGRATED ENERGY REGULATORS’ SYSTEM
The three regulators should establish an integrated energy regulators’ system
that can help them overcome shared challenges and design joint solutions.
Taking advantage of these available synergies, the reviews propose a number of
measures that the regulators could implement together to set up and bolster
this integrated system, contributing to the overall effectiveness of the federal
government and the delivery of its policy objectives.
AGENCY FOR SAFETY, ENERGY AND Natural Resources (SEMARNAT), relying on
ENVIRONMENT (Agencia de Seguridad, the Ministry for financial and administrative
Energía y Medio Ambiente, ASEA) management.
ASEA is a multi-disciplinary regulator. ASEA has navigated initial challenges linked
Its mission is to oversee industrial and to its operationalisation admirably, notably
operational safety and environmental by successfully absorbing functions from
protection. Its responsibilities cover the entire a variety of actors, issuing regulations for
hydrocarbons value chain, from upstream previously unregulated areas, and defining
exploration and extraction to midstream and and implementing robust management
downstream transformation, production and processes. The consolidation of these
storage, and all the way to distribution and results and processes will be crucial for the
retail at petrol station level. successful implementation of the energy
reform in the coming years.
Established in 2015 as part of the energy
reform, ASEA operates in a complex legal
setting, referring to 11 federal laws and
attached to the Ministry of Environment and
MEXICO’S ENERGY REGULATORS . 5
NATIONAL HYDROCARBONS COMMISSION ENERGY REGULATORY COMMISSION
(Comisión Nacional de Hidrocarburos, CNH) (Comisión Reguladora de Energía, CRE)
CNH regulates the “upstream sector” of CRE regulates the “midstream and
hydrocarbons by regulating, monitoring downstream” sectors of hydrocarbons, as well
and evaluating the exploration and as the entire electric power supply chain.
extraction of hydrocarbons in Mexico. It also holds responsibilities linked to the
regulation of clean and renewable energies.
Established in 2008, the functions, powers
and status of CNH were strengthened Created in 1993, the functions, powers and
by the 2013 energy reform. It is now a status of CRE were strengthened by the
ministerial-level entity governed by two 2013 energy reform. Like CNH, it is now a
federal laws, which establish technical, ministerial-level entity governed by two
operational, and managerial autonomy for streamlined federal laws, which establish
the regulator. technical, operational, and managerial
autonomy for the regulator.
The remit of the CNH was substantially
broadened by the energy reform. CNH has Following the reform that substantially
successfully traversed the early phases of increased CRE’s responsibilities, CRE has
implementation of the reform and is seen been able to swiftly realign its organisation
as a professional and trusted regulator. It and processes to focus on implementing
is urgent to build on this trust and track key aspects of the reform. Moving forward,
record to enhance internal processes that it is paramount that CRE also place more
can further support the performance of emphasis on internal processes such as
CNH and fully reap the benefits of its planning, resources and performance
formal autonomy. management in order to ensure its effective
working over the long-term.
6 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
ROLE AND OBJECTIVES – FINDINGS
AND RECOMMENDATIONS
INTEGRATED ENERGY REGULATORS’ SYSTEM
l Set up the Energy Regulators’ Group (ERG) Are the objectives
– a collegial body that brings together the aligned with the regulator’s
three energy regulators for the purpose of
functions and powers?
implementing joint work, co-ordination
and information sharing in the area of
governance of the agencies. The ERG
would be created and its agenda would
be set by the three regulatory agencies. l Ensure that the three agencies have in
Its work would be supported by working place three to five-year operational plans,
groups as necessary (e.g. a working group including budget and resources, to achieve
to set up a shared human resource policy their long-term strategic objectives. The
and mechanisms, to align sector Key plans should consider sequencing and
Performance Indicators (KPIs), or to align phasing activities in line with formal
and simplify licensing procedures), which obligations, and include milestones and
could be dissolved once the assigned task is budget information. This plan should be
delivered. The presidency of the ERG could developed internally and shared with other
rotate between the three agencies, with federal entities through the Co-ordination
each regulator responsible for ensuring the Council for the Energy Sector (Consejo de
secretariat of the committee during their Coordinación del Sector Energético, CCSE).
“mandate”. This mechanism, under the
ownership of the regulators, would be an l Conduct a mid-term review of the
essential tool for the correct functioning of operational plans based on the experience
the integrated energy regulators’ system. of the first years of implementation.
These reviews could be conducted by the
regulatory agencies with external support
as necessary and be used to identify any
necessary modifications to the current
Does the regulator operational plan. The reviews can also
have clearly identified assess the relevance and alignment of the
objectives and targets? agencies’ mandated roles and objectives.ROLE AND OBJECTIVES – FINDINGS AND RECOMMENDATIONS . 7
AGENCY FOR SAFETY, ENERGY AND ENVIRONMENT (ASEA)
ASEA is a deconcentrated agency of the
Ministry of Environment and Natural Resources Is progress towards
(Secretaría de Medio Ambiente y Recursos Naturales, achieving the objectives
SEMARNAT), which sets it apart significantly
from the other two energy regulators, CNH and
reviewed regularly?
CRE, which have ministry level autonomy. As
such, ASEA is subject to SEMARNAT processes
which can be burdensome, and the agency
intervenes in a sector where its parent ministry l Function as a fully-fledged member of the
has limited technical experience. integrated energy regulators’ system (the
Energy Regulators Group, ERG and the Co
ASEA objectives are clearly defined in law. ordination Council for the Energy Sector,
However, it operates in a more complex legal CCSE) and actively propose areas of work
framework than its peers, due to the transfer and co-ordination relevant to ASEA to the
of powers and functions from a variety of ERG and the CCSE.
federal and state actors following its creation
in 2015. Pursuant to its multidisciplinary l Foster a culture of independence within
mandate, ASEA is called upon to co-ordinate ASEA to offset the Agency’s lesser legal
with a wide variety of stakeholders. These autonomy.
characteristics make it essential for ASEA to
be a fully-fledged member of the integrated l Finalise the ASEA reglamento unificado to
energy regulators’ system. clarify mandate and functions and socialise
the new text and its implications with
ASEA has made considerable advances in stakeholders.
defining its strategic objectives and the
accompanying performance assessment l Review and fine-tune the strategic
system in its first years of operations. A more framework to include medium and long
broad and medium- to long-term vision would term and high-level policy objectives.
strengthen this framework.
Are there operational BIENVENIDO
plans to achieve objectives
and targets? GASOLINERA
BIENVENIDO8 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
NATIONAL HYDROCARBONS COMMISSION (CNH)
Entrusted with the responsibility of running
Can the objectives
a novel process for Mexico – the auctioning be used to develop
of the access to oil resources – CNH has performance indicators?
successfully managed the launch of the first
round of auctions. The professionalism in
running this process, a conscious effort to
be transparent and the development very
early on of a code of ethics against undue
influence from industry and government have l Broaden the planning horizon of the
created a capital of credibility that needs operational plan, for example by aligning
to now be invested into building internal it to key CNH deliverables (e.g. five-year
processes supporting performance over time. auction plan, management of potential
This should start with the development of future contracts and entitlements).
a comprehensive strategy to steer CNH’s
activities. l Set short to medium-term priorities by
weighting sector and organisational risks
CNH has started a vision/planning exercise so that actions can be streamlined and
that has led to the identification of six priorities can be communicated internally
core strategic objectives, stemming from to align CNH workforce around the same
the CNH’s enabling legislation, as well as vision and goals.
general, specific and operational actions to
be implemented over a one-year horizon. l Set up internal mechanisms for developing
However, there isn’t yet a medium-term and overseeing the implementation of the
operational plan to set priorities for strategy, its medium-term objectives as
the achievement of the core strategic well as annual operational plans.
objectives. Administrative and operational
demands related to CNH’s new tasks and
responsibilities have been particularly intense
for staff, leaving limited space to consolidate
and focus on more analytical and strategic
tasks like deciding which oil fields are to be
auctioned, or monitoring exploration and
extraction entitlements and contracts.
Are operational plans
adjusted to reflect progress
towards meeting objectives
and targets?ROLE AND OBJECTIVES – FINDINGS AND RECOMMENDATIONS . 9
ENERGY REGULATORY COMMISSION (CRE)
The 2013 energy reform created additional How are overlaps
regulatory responsibilities for CRE in the
with other actors
hydrocarbons and electricity sectors. The
reform also provided CRE with a new status minimised?
as a co-ordinated energy regulator with
technical, operational and managerial
autonomy and the ability to generate income
to carry out its regulatory responsibilities.
l Develop annual plans that set out the
Fully occupied with implementing the reform, activities that CRE intends to undertake
CRE has not yet developed a strategic plan. in that year in order to implement the
Greater emphasis will be required on setting medium and long-term goals set out in
and implementing strategic objectives, its operational plan. CRE should also put
while pursuing the implementation of the into place arrangements to ensure that
reform. This is particularly important given the work plans of its units are aligned with
the recent decision to bring forward the these annual plans and revise internal
liberalisation of the downstream gasoline planning processes so that they reflect all
and diesel markets, which will continue CRE’s of the activities needed to deliver CRE’s
heavy workload in implementing the energy annual plan.
reform. The delivery of this policy objective
is also dependent on co-ordination among l Communicate CRE’s progress in delivering
CRE, the Ministry of Finance and Public Credit its annual plan by providing regular
(SCHP), the Federal Economic Competition updates to stakeholders through the
Commission (COFECE) and the Federal Advisory Council.
Consumer Protection Agency (PROFECO).
l Establish a formal co-ordination
mechanism between SHCP, COFECE, CRE
and PROFECO to support the successful
implementation of the liberalisation
Are co-ordination of Mexico’s downstream gasoline and
mechanisms used diesel markets. This would facilitate the
timely transfer of information between
effectively?
the agencies, for example where price
information collected by CRE indicates that
there is market conduct that needs to be
investigated.10 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
INPUT – FINDINGS
AND RECOMMENDATIONS
INTEGRATED ENERGY REGULATORS’ SYSTEM
l Conduct a co-ordinated collective review – Opportunities for joint induction
of financial sources and needs beyond programmes for new recruits (for
2019. An integrated energy regulators’ example on regulatory skills);
system can provide unique opportunities
– A common graduate recruitment system
to identify overall funding needs over the
with exchanges across regulators;
medium to long-term. The objective should
be to link missions and activities, related – Common gender and diversity policy
costs and revenue sources, based on a cost across the regulators;
recovery mechanism. The three regulators
– Comparable career systems to facilitate
should assess current and future sources of
movement across the three agencies;
funding in a co-ordinated fashion to identify
needs over the long term, cumulative costs – Common salary scales.
for the regulated entities and a streamlined
Trust Fund management system. l Ensure that the recruitment strategy
emphasises diversity. If the regulators do
l Establish an integrated energy regulators’ not proactively tap into all talent pools,
career service (ERCS), in a progressive they are not likely to attract a diverse,
manner. There are significant opportunities vibrant and competitive workforce.
to develop an integrated ERCS common
to the three regulators, which can be l Mutualise digital resources and develop
greater than the sum of its parts. The ERCS data analytical capability. Digitalisation
would provide opportunities to attract provides significant opportunities to
and retain talent more easily, and create deliver on priorities and actions, but
economies of scale for the establishment its development and management
of common systems, while each regulator require internal capabilities. There are
would retain control on recruitment opportunities to mutualise capabilities of
decisions, performance assessment and the the three regulators by developing common
identification of specific competencies and solutions, sharing a group of IT specialists
skills. The ERCS could include: and relying on off-the-shelf solutions. IT
expertise should be complemented by
– Common mechanisms/procedures for
capacity for using digitalisation to read
advertising positions;
and manage data in order to facilitate the
– A common set of regulatory skills to be delivery of core activities (and truly make
identified jointly by the three regulators digitalisation a means to an end).
(in addition to those specific to each
agency);INPUT – FINDINGS AND RECOMMENDATIONS . 11
AGENCY FOR SAFETY, ENERGY AND ENVIRONMENT (ASEA)
By law, ASEA is funded by the federal budget
and its own income. In reality, the agency does Are the regulator’s funding
not yet receive funds from regulated entities and staffing aligned with its
and has not yet set up the trust fund that
objectives and targets?
would receive these resources. It is intended
that the Agency will gradually reach financial
autonomy.
As a deconcentrated agency of SEMARNAT, l Explore and strongly advocate for solutions
ASEA is governed by SEMARNAT rules and that will increase the institutional
procedures for managing financial and agility and autonomy of ASEA, including
human resources and for procurement. These advocating for a multi-annual budget
processes can carry a high transaction cost settlement.
and are seen to undermine effective and
autonomous operations. l Prioritise the operationalisation of the
ASEA trust fund and move towards
Regulators are faced with the challenge of less dependence on the federal budget,
attracting and retaining qualified staff, a reviewing and defining methodologies for
task that will grow more difficult as oil prices setting fees and levies, in collaboration with
recover and the development of the industry the Ministry of Finance and Public Credit.
in Mexico picks up speed. ASEA has explored
and implemented strategies to attract and l Establish an internal Resource
retain staff in a challenging context due to Management Committee to regularly
competition from the private sector and lack assess and re-allocate resources, roles and
of flexibility within the federal system. These processes, prioritising high risk activities
efforts are worth pursuing in collaboration with and taking into account the stabilisation of
CNH and CRE. activities following the Agency’s start-up
phase.
l Continue to explore and propose solutions
making ASEA a more attractive employer,
from flexibility within the federal salary
scale to non-financial rewards.
Is there a transparent and
accountable process to allocate
financial resources to the
regulator?12 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
NATIONAL HYDROCARBONS COMMISSION (CNH)
The CNH is funded through the federal Can the regulator
budget and fees, taxes and duties. CNH’s manage resources
own income has come from the most part
from selling information for exploration and
autonomously?
extraction to the regulated sector. The energy
reform foresees that by 2019 CNH should be
fully funded through fees, taxes and duties
from the regulated sector.
l Develop robust internal financial
Fees, taxes and duties are paid into a trust management mechanisms to identify
fund. The CNH cannot make use of the spending needs linked to priority actions
trust fund until the third month of the year and consider a multi annual budget
and needs government approval in order settlement in Congress, providing financial
to do so. These processes represent a high stability and facilitate long-term planning.
transaction cost and undermine effective
and autonomous operations. The lack of l Strengthen the recruitment process and
a medium to long-term strategic plan and incentives to retain personnel, including
performance evaluation also hinders CNH’s through a competitive recruitment process
capacity to prioritise activities in the most able to attract and retain staff, building
efficient manner. on the recommended regulatory career
service.
There is currently no established recruiting
mechanism to fill in vacancies and little l Consider having an annual training and
has been done to put in place such a career skills development programme to stay up-
service. This can create a perception of to-date with new and innovating methods.
unfairness and undermine the capacity of
CNH to attract and retain talent over time.
The CNH also needs more autonomy and
flexibility to attract and retain talent, given
the competition with the regulated sector on
talent and the constraint of the federal salary
scale.
Can the regulator attract
and retain the necessary
talent to meet its objectives
and targets?INPUT – FINDINGS AND RECOMMENDATIONS . 13
ENERGY REGULATORY COMMISSION (CRE)
CRE’s financial and human resources have l Strengthen the recruitment process by
increased substantially over a short period making it competitive and create incentives
of time due to significant expansion in to retain personnel, building on the
its regulatory mandate due to the energy recommended regulatory service career
reform. While its headcount has risen by system.
163% between 2012 and 2016, CRE has not
yet established job descriptions setting l Align internal processes, such as budgeting
out the specific professional and technical and staff evaluation and development with
requirements for each position within CRE. the operational and annual plan. Linking
these internal processes to the operational
At the same time, CRE faces competition for and annual plan would align CRE’s
its staff from the private and public sector. resources to the delivery of the objectives
While CRE seeks to provide competitive in these plans and to the CRE’s strategic
salaries within the confines of the federal objectives.
salary scales, there appear to be opportunities
for CRE to improve staff retention by l Conduct strategic workforce planning.
providing further non-salary incentives. This Strategic workforce planning involves
may assist them to recruit and retail staff identifying the needs of the organisation
with specific skills, such as expertise in tariff in terms of numbers and skills in the
setting. medium-term consistent with the
objectives that are sought to be achieved
in the operational plan. This strategic
Does the regulator have workforce planning would then inform
the discussions with SHCP about future
sufficient data analysis resources
resourcing needs, and could avoid
to harness the challenges of bunching human resources together in a
fast evolving markets manner which poses a challenge for the
and sectors? organisation to absorb.
l Consider additional non-salary incentives
to attract and retain staff and build
internal capacity. CRE could consider staff
exchanges with other economic regulators
to share expertise, continuing to pursue
partnerships with universities and other
institutions to provide opportunities for
staff to further increase their expertise, and
flexible working arrangements to enable
staff to balance work with their personal
responsibilities.14 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
PROCESS – FINDINGS
AND RECOMMENDATIONS
INTEGRATED ENERGY REGULATORS’ SYSTEM
l Consider the creation of a joint risk The agencies should harmonise their rule-
management strategy that enables making process including stakeholder
the agencies to share information and engagement mechanisms (apart from the
create a platform that allows synergies compulsory consultation with the Federal
between them. The strategy may consider Commission for Regulatory Improvement,
elements such as setting clear governance COFEMER) based on the forthcoming OECD
and responsibilities on the management Best Practice Principles on Stakeholder
of the strategy, having a score to address Engagement, disseminating calendars
the most imperative issues, measures and of upcoming regulation to the regulated
ways to address the aforementioned risks sector, and conducting ex post evaluations to
and specific guidance to elaborate the risk verify that the intended objectives of issued
matrix. The topics could be discussed in the regulation are being met. The synergies
Energy Regulators’ Group (ERG). would enhance the benefits of a harmonised
process while decreasing transaction costs
l Assess the digitalisation needs of each involved in designing and implementing
regulator. Evaluate where ICT processes these mechanisms separately.
can be shared in order to reduce costs
and to exchange knowledge (i.e. service l Assess and review the internal governance
platforms for data analytics and talent arrangements in light of changes to agency
management). Particular focus should objectives and activities brought about by
be given to the automation of internal the reform. Particular attention should be
management processes. given to assessing roles and responsibilities
for decision-making and day-to-day
l Seek to have an aligned process within the management of the agencies, as well as to
integrated energy regulators’ system to the necessary continuity and stability of
improve regulatory quality. these functions.
Who is the regulator How are conflicts
accountable to? of interest addressed?PROCESS – FINDINGS AND RECOMMENDATIONS. 15
AGENCY FOR SAFETY, ENERGY AND ENVIRONMENT (ASEA)
The Executive Director (ED) of ASEA is
What evidence and data
nominated by the Minister of SEMARNAT and
appointed by the President of the Republic. support regulatory decisions
Most decisions linked to the technical work and of the Board /Head
management of the Agency are made by the ED.
of Agency?
Like all federal entities, ASEA is accountable to
Congress but presents its annual reports to the
Technical Council led by the Minister. ASEA can l Enhance and include a transparency
be called to appear in Congress, but hearings do dimension in all ASEA activities to build
not happen systematically. trust in the regulator and boost its culture
of independence. This could include pro-
ASEA has set safeguards to avoid conflict of actively publishing information relative to
interest through a code of conduct that strictly inspections, meetings of ASEA governing
regulates interaction with regulated entities. and advisory bodies, and stakeholder
Unlike CNH and CRE, ASEA’s code does not engagement.
instate a supervisory mechanism. Moreover,
the Agency is audited as any subsidiary l Advocate for the creation of an ASEA-
or deconcentrated entity of the ministry specific Internal Audit Office.
and is supervised by SEMARNAT’s Internal
Audit Office (Órgano interno de control, OIC) l Review the Agency’s current governance
which does not reflect its critical role in the model and explore options for more
implementation of the energy reform. continuity in decision-making and focused
oversight of strategic planning.
ASEA follows federal requirements for
stakeholder engagement and has also set l Ensure that the reglamento unificado
up early-stage consultation mechanisms. It reflects good regulatory practices such as
is expected that the reglamento unificado will administrative simplification.
improve the overall quality of ASEA’s regulatory
activities.
Which processes
support the quality
of regulatory activities?16 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
NATIONAL HYDROCARBONS COMMISSION (CNH)
CNH is headed by a governing council made How does the regulator
up of seven Commissioners of whom one
serves as the President Commissioner. The
manage and evaluate
President of the Republic presents a shortlist risks?
of three candidates for each Commissioner
position and the Senate chooses following a
hearing.
The President Commissioner acts both as l Allow the governing council to be more
chairman of the governing council and as the focused on strategic decision-making by
chief executive officer. There is no designated enhancing the role of a Chief Operating
person acting as operational Co-ordinator. Officer.
Cumulating these functions without such a
co-ordination role burdens the agenda of the l Create an internal Regulatory Committee
President Commissioner with operational to oversee the rule making process and
matters, leaving a narrow margin for strategic embed regulatory management tools.
thinking and representation.
l Consider having diverse ways of engaging
As all federal entities, the CNH is accountable with stakeholders that are not the “usual
to Congress and Audit Institutions. However, ones” and facilitate the involvement of new
there is no regular reporting and interaction small companies in the business.
with relevant bodies in Congress.
The CNH has set safeguards to avoid
conflict of interest such as an internal Code
of Conduct and the issuance of a yearly How does the regulator
declaration of conflict of interest from engage with stakeholders?
Commissioners, Heads of Unit and General
Directors.
The regulatory process builds on internal
and external quality control mechanisms,
including stakeholder engagement and
regulatory impact assessment. However,
some of the internal mechanisms
are either ad hoc or still in
the early stages of
development.PROCESS – FINDINGS AND RECOMMENDATIONS. 17
ENERGY REGULATORY COMMISSION (CRE)
Have responsibilities
CRE’s decision-making body is its Governing and capacity for the day-to-day
Council, which is composed of seven
management of the regulator
Commissioners, one of whom serves as the
been clearly identified
President Commissioner. All meetings of the
and assigned?
Governing Council are publicly broadcast.
Meetings between Commissioners and industry
are held at CRE’s premises with at least two
Commissioners present, and are recorded.
l Put in place arrangements to allow the
Commissioners also participate in the Governing Council to focus on CRE’s strategy
development of regulation in Commissioner and the delivery of the long-term goals in
working groups, which were established CRE’s operational plan. This would involve
to distribute the workload associated with looking at steps to empower staff to deliver
implementing the 2013 reform. Separate projects more independently, and providing
working groups were established on additional time for the Governing Council to
electricity, natural gas and petroleum. review, challenge and focus on the strategic
Commissioners also work directly with staff implications of its work programme.
in the development of specific regulation.
l Consider whether tariff-setting processes
The regulation that CRE develops is subject to should be opened to public consultation,
the COFEMER process, which requires CRE to and whether sufficient consultation is
prepare regulatory impact assessments and taking place for other regulatory processes.
submit regulation to a public consultation
process. While CRE has a Regulatory l Link the current review of hydrocarbon
Performance Evaluation Committee that tariff setting methodologies with the
is tasked with reviewing its regulation, it process of formalising electricity tariff
has not yet developed processes for the setting arrangements. This review could
ex post review of regulation. However, CRE draw on tariff setting approaches and
does review its regulatory approach, and practices in other jurisdictions, including
is currently in the process of revising its looking at linking tariffs to the outputs that
approach to tariff regulation and making it consumers demand (for example, reliability
consistent across hydrocarbon markets. and quality).
Have digitalisation
needs been assessed
and addressed?18 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
OUTPUT AND OUTCOME – FINDINGS
AND RECOMMENDATIONS
INTEGRATED ENERGY REGULATORS’ SYSTEM
Is the performance of the
l Set organisational performance regulated industry assessed
indicators to measure and track the systematically?
agencies’ effectiveness of implementing
the strategic goals and activities in the
operational plan. The indicators should:
– measure the organisations’ inputs and should be communicated to senior staff
processes through critical dimensions within the regulators on a regular basis
such as quality, efficiency and timeliness; to serve as a dashboard of progress and
current trends in the energy sector.
– assess the impact of delivery of outputs
(for example, permits granted, open
l Establish a common platform for
seasons, inspections) on outcomes (for
providing information to stakeholders
example, new entry in markets, market
about the performance of the energy
concentration ratios for each of the
sector. The indicators that the regulators
hydrocarbon markets, and compliance
use as a watchtower for assessing the
with regulatory obligations).
performance of the sector should be made
available externally, in order to enable all
l Consider the data and information that
stakeholders to track the performance of
will be needed to measure performance
the energy sector, using a single source
for each of the indicators. Where
of information. This could be developed
possible, indicators would be tracked with
through the ERG.
information that the agencies already
collect from regulated industry and
l The agencies should report regularly to
elsewhere.
the CCSE, the ordinary Energy Committees
of the two chambers of Congress and the
l Overall energy sector outcomes should
Special Commission of the Co-ordinated
be used as an indicator of the impact
Energy Regulators, tailoring the content of
of a regulator’s delivery, recognising
the reporting to the body’s mandate.
that a diversity of factors can affect
the performance of the sector. Overall
indicators could be used to serve as a
“watchtower” for assessing the overall
performance of the sector, and the
regulator’s own performance in delivering
its operational plan. This informationOUTPUT AND OUTCOME – FINDINGS AND RECOMMENDATIONS . 19
AGENCY FOR SAFETY, ENERGY AND ENVIRONMENT (ASEA)
ASEA has recognised the importance of
assessing its own performance and the How is information from
Agency’s leadership team has engaged in an
performance and impact
exercise to set strategic objectives as well as
indicators to monitor their implementation assessments used?
since 2015. To consolidate these advances, the
framework should be reviewed to present an
appropriate balance between input and process
(internal functioning) and output and outcome l Build skills and internal capacity to analyse
(sector performance) indicators, so as to give the data that will be sent to ASEA by the
medium/long-term visibility to the Agency. industry and ensure that this is in place for
late 2018 when SEMS data will begin to be
A wealth of data will be provided by the submitted.
industry as of 2018, pursuant to SEMS
regulation. ASEA needs to ensure that it has l Explore and implement more engaging and
adequate skills and resources to process and accessible ways to communicate on the
analyse the data that will be sent by regulated activities and results of the Agency, beyond
entities to adequately report on sector the publication of its institutional annual
performance. report on the website.
l Develop a methodology for engaging with
Is the performance the industry on their performance, based
on the analysis of the data submitted.
of the regulator and impact
This would include the compilation of an
of its activities assessed annual report and its socialisation to the
systematically? wider public.
l Review and fine-tune the performance
indicators to allow for the monitoring of
medium and long term and high-level
policy objectives.20 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
NATIONAL HYDROCARBONS COMMISSION (CNH)
The CNH hosts the National Centre for l Develop a comprehensive set of indicators
Hydrocarbon Information (Centro Nacional that track not only actions and inputs but
de Información de Hidrocarburos, CNIH) that also outputs from CNH’s regulatory activities
receives all data provided by the regulated as well as direct and wider outcomes.
sector, including PEMEX. The CNIH has
developed a dedicated platform where l Advocate for a formal engagement
information regarding the exploration and mechanism for the CNIH that can help the
extraction of hydrocarbons can be accessed management and development of data.
(portal.cnih.cnh.gob.mx).
l Evaluate information needs and aim at
In 2016, the CNH carried out a process collecting fit-for-purpose data that will
to define their vision and set high-level be useful to support the performance of
objectives that would allow monitoring its the hydrocarbon sector (especially on
performance. However, the planning exercise measurement of production/extraction).
did not produce granularity on timelines,
milestones or budget requirements to attain l Assess internal information needs and
the regulator’s six core objectives. develop the mechanisms to produce, share
and use information.
l Develop a dashboard – with regular
Have data needs updates and information for the leadership
team and the governing council – on
been assessed tracking progress of the objectives and
and addressed? activities of CNH.
ENERGY REGULATORY COMMISSION (CRE)
Has the regulator
CRE collects a large amount of data from the
regulated industry in order to carry out its developed internal capabilities
regulatory responsibilities, some of which to develop and monitor
include making information available to the
performance indicators?
public (such as information on gasoline and
diesel prices). This data could be useful for
assessing how CRE performs.
In the absence of an operational plan and prepare an annual report, but it does not
strategic objectives, CRE does not yet have a have a regular obligation to report on
framework for measuring its performance. its performance aside from reporting of
CRE is accountable to Congress, and does indicators to SHCP.REGULATORS, PERFORMANCE AND THE DELIVERY OF PUBLIC SERVICES . 21
Regulators, performance and the
delivery of public services
Will my light switch work? Will the train run on time? Can I fill the
tank of my car? Is there clean water in the tap?
As “market referees”, regulators contribute opportunities, better targeting of scarce
to the delivery of essential public utilities. resources and overall, for improving the
Regulatory agencies are at the forefront of performance of regulatory policies and
making sure citizens and industry have access regulatory agencies. To help regulators in this
to fundamental essential services that create quest, the OECD has developed an innovative
enjoyable, prosperous and safe places to live, framework that looks at the internal and
work and do business. external institutions, processes and practices
that can enhance regulators’ performance
To be successful, regulators need to be and bolster their performance measurement
constantly alert, informed by live data, efforts.
checking sectoral trends and assessing the
impact of their decisions. The performance PERFORMANCE ASSESSMENT FRAMEWORK
of regulators is also largely determined by FOR ECONOMIC REGULATORS (PAFER)
their internal governance (their organisational REVIEW PROCESS
structures, behaviour, accountability, business
processes, reporting and performance The analytical framework that informs this
management) and external governance (roles, review draws on OECD work on measuring
relationships and distribution of powers and regulatory performance and the governance
responsibilities with other government and of economic regulators. Measuring regulatory
non-government stakeholders). performance can prove challenging, starting
with knowing what to measure, a number
Measuring regulatory performance allows of confounding factors that can also affect
for the identification of bottle-necks and outcomes, or a lack of data and information.22 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
To overcome some of these difficulties, the held to account, to improve the overall
framework breaks down the regulatory effectiveness of regulators and promote
process into a sequence of discrete steps in an growth and investment, including by
input-process-output-outcome logic that can supporting competition. Using the seven
be tailored to economic regulators. principles (Figure 1), the PAFER review
identifies the drivers of performance and
The OECD Best Practice Principles on the studies the environment and context where
Governance of Regulators recognise the regulators operate (external governance)
importance of assessing how a regulator and how regulators work internally (internal
is directed, controlled, resourced and governance).
Figure 1. OECD Best Practice
Principles on the Governance
of Regulators
1
Role clarity
7 2
Preventing undue
Performance
influence and
evaluation
maintaining
trust
Best
practice
6
principles 3
Decision making
Funding and governing body
structure
5 4
Accountability
Engagement
and transparency
Source: OECD (2014). OECD Best Practice Principles for Regulatory Policy, The Governance of Regulators, OECD Publishing, Paris,
http://dx.doi.org/10.1787/9789264209015-enREGULATORS, PERFORMANCE AND THE DELIVERY OF PUBLIC SERVICES . 23
PERFORMANCE INDICATORS effective use of a regulator’s input, the
quality of the regulatory processes and
For regulators, performance indicators identify outputs and some direct outcomes
need to fit the purpose of performance that can be attributed to the regulator’s
assessment, which is a systematic, analytical interventions. Wider outcomes should
evaluation of the regulator’s activities in serve as a “watchtower”, which provides
order to evaluate the reliability and usability the information the regulator can use to
of the regulator’s activities. Accordingly, identify problem areas, orient decisions and
indicators need to assess the efficient and identify priorities (Figure 2).
Figure 2. Input-process-output-outcome framework for
Role & performance indicators
Objectives
Clearly identified role & objectives
Clear role and set of objectives aligned with functions and powers to inform
actionable performance indicators
Efficiency and effectiveness of input
Organisational and financial performance
Input (e.g. planned activities completed on time and on budget).
Quality of processes for regulatory activity
Existence and effective use of regulatory tools and processes
(e.g. measurement of accuracy, timeliness, accessibility, participation,
risk analysis, use of evidence).
Process Output from regulatory activity
Effective regulatory decision, actions and interventions
(e.g. decisions taken which were upheld).
Direct outcome/impact Market structure
of outputs (e.g. level of concentration);
(e.g. compliance with regulator’s
Service and infrastructure quality
decisions).
Output (e.g. frequency and reliability of services
Wider outcomes to consumers, reliability and deployment
To note that these indicators are of infrastructure);
meant to be a “watchtower’ to loop
Consumer welfare
back and help identify problem
(e.g. ability of consumer to choose the
areas, orient decisions and identify
service that best fits their preferences);
priorities; they should be used as
learning (rather than accountability) Industry performance
Outcome indicators: (e.g. revenues, profitability, investment).
Source: OECD (2015), Driving Performance at Colombia’s Communications Regulator, Figure 3.3
(updated in 2017), OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264232945-en.24 . THE GOVERNANCE OF REGULATORS: DRIVING PERFORMANCE AT MEXICO’S ASEA, CNH AND CRE
NETWORK OF ECONOMIC REGULATORS (NER) countries from across the world. It brings
together regulators with responsibilities for
What makes a “world-class regulator”? The communications, energy, transport and water,
OECD Network of Economic Regulators (NER) in addition to other economic, competition,
has been addressing this question through consumer, environment and safety issues.
objective data, rigorous analysis and dialogue. Members share their experiences, discuss
A subsidiary body of the OECD Regulatory challenges, identify innovative solutions, and
Policy Committee, the NER is an open and balance the competing priorities that frame
unique forum that promotes dialogue across the features of a “world class regulator”.
regulators operating in different sectors and
2012
RECOMMENDATION OF THE
COUNCIL ON REGULATORY
POLICY AND GOVERNANCE
The Governance of Regulators
The Governance of Regulators
The Governance of Regulators
The Governance of Regulators The Governance of Regulators
The Governance of Regulators
Driving Performance Driving Performance
Driving Performance
at Mexico’s Agency at Mexico’s National
at Mexico’s Energy
for Safety, Energy Hydrocarbons
Regulatory Commission
and Environment Commission
Driving Performance at Mexico’s Agency for Safety, Energy and Environment
Driving Performance at Mexico’s National Hydrocarbons Commission
Driving Performance at Mexico’s Energy Regulatory CommissionThe reports presented in this brochure were REFERENCES
discussed in the OECD Network of Economic
Regulators (NER) in April 2017 and peer reviewed OECD (2017a), Driving Performance of Mexico’s
by senior officials from the National Energy Board Energy Regulators, OECD Publishing, Paris.
(Canada), the National Energy Commission (Chile), http://dx.doi.org/10.1787/9789264267848-en
the Petroleum Safety Authority (Norway), the
National Commission for Markets and Competition OECD (2017b), Driving Performance at Mexico’s
(Spain), the Office of Gas and Electricity Markets Agency for Safety, Energy and Environment,
and the Water Industry Commission for Scotland OECD Publishing, Paris.
(United Kingdom). Data informing the analysis in http://dx.doi.org/10.1787/9789264267848-en
the reports was collected through desk research,
questionnaires completed by Mexico’s energy OECD (2017c), Driving Performance at Mexico’s
regulators and meetings with senior management National Hydrocarbons Commission, OECD
and staff of the regulators. Publishing, Paris.
http://dx.doi.org/10.1787/9789264280748-en
OECD (2017d), Driving Performance at
Mexico’s Energy Regulatory Commission, OECD
Publishing, Paris.
http://dx.doi.org/10.1787/9789264280830-enOECD work on regulatory policy
www.oecd.org/gov/regulatory-policy
OECD Network of Economic Regulators (NER)
www.oecd.org/gov/regulatory-policy/ner.htm
Agency for Safety, Energy and Environment (ASEA)
www.gob.mx/asea
National Commission for Hydrocarbons (CNH)
www.gob.mx/cnh
Energy Regulatory Commission (CRE)
www.gob.mx/cre
For more information, please contact:
Faisal Naru
Faisal.Naru@oecd.org
Filippo Cavassini
Filippo.Cavassini@oecd.org
Anna Pietikainen
Anna.Pietikainen@oecd.org
Guillermo Morales
Guillermo.Morales@oecd.org
Design and imagery: Baseline Arts Ltd, Oxford
Illustrations: Shutterstock.com
Front cover image: Leigh Prather – Fotolia.com,
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