13 Oct 2009

Mexican govt closes state-owned electricity company

5:52 am on 13 October 2009

The Mexican government has closed a state-owned electricity company that provides power to Mexico's capital and surrounding states.

The government says chronic inefficiency at Luz y Fuerza has made it unsustainable and the company will be taken over by another state agency.

According to the government, spending at the company was increasingly outpacing sales.

The BBC reports Mexico is trying to cut public spending to offset falling oil revenues.

The Federal Electricity Commission, a state-run utility that provides electricity across the rest of the country, is to provide services to Luz y Fuerza's customers.

The government said the company's costs between 2003 -2008 were 433 billion pesos ($US32.5 billion). Sales were 236 billion pesos.

The government said about half of the staff costs went toward pensions for 20,000 retired employees.

President Felipe Calderon said the company could not continue to be funded without increasing electricity rates or taxes, which he said would be "unfair particularly when the country is going through tough economic times".

However, he denied union claims that the government was going to privatise the company.