Policy Research Supporting Policy Making: The CIDE-CRE Agreement

This paper presents a case study of regulation of natural gas pricing in Mexico as a case of “successful” policy research. Studies done under an academic agreement between the Comisión Reguladora de Energía (CRE) and the Centro de Investigación y Docencia Económicas (CIDE) in Mexico City have analyzed the welfare efficiency implications of the netback rule based on the Houston gas price that is used to set the domestic gas price. This rule results from a well structured welfare maximization general model. However, in practice the netback rule has been debated during several North American price spikes. Policy makers relied on CIDE studies to keep the netback rule. This case study examines how and why policy makers did so. The debate within the Mexican government is analyzed, and the actors involved in the policy discussions are described, as well as the relationships between CIDE and CRE that were developed, and that helped in the communication with policymakers. The methods of dissemination of research are also discussed.