EVALUATION OF AN EXPANSION OF THE ELECTRICITY TRANSMISSION SYSTEM IN MEXICO

Glenn Jenkins (), Henry Lim and Gangadhar Shukla

No 1999-05, Development Discussion Papers from JDI Executive Programs

Abstract: In the past, most evaluations of the electric utility investments have been based on the assumptions that the suppliers of electricity would provide the quantity of energy demanded at an acceptable level of reliability. The question addressed in most of the investment appraisals has been: “is this investment the least cost way to supply the electricity demanded?” In real life the situation is usually very different in most countries. Shortages, outages and deterred demand have been the rule, rather than the exception. This study of a major rehabilitation program by Comision Federal de Electricidad (CFE) of Mexico (Mexico Public Electric Utility) presents a practical method of analysis for an investment to rehabilitate an existing electricity transmission system. First, the analysis is done in an integrated fashion where the financial, economic, distributive, and risk aspects of the project are examined together on a consistent basis. Second, the value of each of the components of the supply improvement, i.e. reduction in shortages, outages, transmission losses, is considered separately and then combined in the overall appraisal. Third, the risks imposed on these investments from such macro-economic variables as changes in the real exchange rate and the rate of inflation are modeled, based on real world data, and combined with the risks inherent in the project inputs, such as fuel and investment costs to make an assessment of the overall risks associated with the undertaking of these investments.

Keywords: Mexico; electricity; rehabilitation; investment; generation; transmission; appraisal (search for similar items in EconPapers)
JEL-codes: D61 H43 L94 (search for similar items in EconPapers)
Pages: 70 pages
Date: 1999-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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