Mexico shuts inefficient power utility

MEXICO CITY, (Reuters) – The Mexican government  announced the closure of the inefficient state-owned company  that supplies electricity to Mexico City and its surrounding  area yesterday, a move that could trigger labor strife.  

Preparing for trouble, riot police occupied installations  of Luz y Fuerza del Centro (LFC) on Saturday night ahead of a  decree ordering its absorption by the Federal Electricity  Commission, Mexico’s main state power utility.
President Felipe Calderon has singled out LFC in recent  weeks as a prime example of what is wrong in Mexico’s public  sector.  

The government said it was shutting the utility because of  its inefficiency and massive operating losses that cost it  almost as much as Mexico’s army.  

“It is necessary to liquidate a company that has created a  gap in public finances at a time when the international crisis  … is forcing us to take steps to deal with fundamental  priorities, like poverty, healthcare and public security,”  Interior Minister Fernando Gomez Mont told reporters. 
Keeping LFC running has represented a growing fiscal  burden, especially as Calderon’s government pushes for an  austere budget that will raise energy costs and taxes next year  to offset lower oil production.  

Finance Minister Agustin Carstens told reporters it will  cost about 20 billion pesos ($1.5 billion) to shut down the  utility and pay off its 47,000 employees.  

Union leaders promised widespread protests. Thousands of  workers gathered in the capital as union spokesmen called for  support from labor groups across Mexico.  

LFC’s cost base has been swelled by a huge workforce and a  generous retirement scheme. Also, the government said the  utility loses a third of its electricity to technical problems  and theft.

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