iBusiness, 2013, 5, 147-153
Published Online December 2013 (http://www.scirp.org/journal/ib)
http://dx.doi.org/10.4236/ib.2013.54018
Open Access IB
147
Organizational Efficiency in Electric Mexican Enterprise:
Luz y Fuerza del Centro (LyFC) as Reason for Extinction
Luis Arturo Rivas Tovar, Benito Vargas Álvarez, Adela Chavez
Business and Commerce School, IPN, Mexico City, Mexico.
Received May 2nd, 2013; revised June 2nd, 2013; accepted July 1st, 2013
Copyright © 2013 Luis Arturo Rivas Tovar et al. This is an open access article distributed under the Creative Commons Attribu-
tion License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly
cited.
ABSTRACT
This paper analyzed the internal and external factors that determined the efficiency of LyFC before its extinction, al-
lowing for a comparative assessment of perceptions in which former electrical workers argued the unconstitutionality of
this action, and the Federal Government justified under the low efficiency argument that was reflected in the decrease of
indicator User Interruption Time (TIU), an indicator in which the Federal Government determines the efficiency of the
Agency. The study is correlational, descriptive, transversal and applies a measuring instrument with 93 items to a popu-
lation of 267. For the analysis of results, we used SPSS and descriptive statistics and inferential. The results allowed us
to point out that the budget allocation variables, technology, work organization, material assignment, administrative
efficiency, distribution networks, housing growth and external factors mentioned in this research itself directly influ-
enced the efficiency of the Light and Power Center (LyFC) and explanatory variables were terminated. Moreover, the
comparison of operating performance and workloads receiving utilities shows that although the Mexican Federal Elec-
tricity Commission (CFE) is a very inefficient, labor costs and benefits were higher in LyFC and were certainly a reason,
its extinction.
Keywords: Electrical Industry; Efficiency; Utilities; Light and Power of the Center; CFE; Mexico
1. Introduction
Until 2009, Mexico had in electric industry two public
companies operating as a monopoly; light and power
central region company Compañia de Luz y Fuerza del
Centro (LyFC) (from now) and the Federal Electricity
Commission (CFE from now).
(LyFC), underwent several changes in its structure as a
business generator and distributor of electricity, from its
creation to its extinction. Among LyFC and CFE, they
guaranteed access to electricity to 97% of the Mexican
population. Both public companies were decentralized,
with legal personality and its own.
The principal problems in LyFC were:
Lack of materials on time was caused by delays in
some areas, mainly in the maintenance and construction
new power feeders for new services [1].
Human resources management was inefficient. At the
time of termination of employment made a loss of 240
billion pesos, only 80 billion corresponded to active em-
ployees and 160 billion to retirees [2].
The investment in training, was not reflected in in-
creased productivity.
The rise of position and employees was unrelated to
the employee’s performance [3].
There was no proper supervision in materials which
ultimately led to the delay of the work to be performed,
due to the lack of materials [4].
Similarly, the following arguments were put forward
by the Mexican federal government (Calderón president
2006-2012 who in 2009 decided its extinction):
... “That since its inception, the decentralized or-
ganization has continued to receive substantial budgetary
transfers, which far from decrease have been increased in
recent years, suffice it to say that from 2001 to 2008,
such transfers increased by more than two hundred per-
cent and that for this year such transfers will be around
41.945 million pesos, to continue the same behavior, it is
estimated that total could reach 300 billion pesos during

Organizational Efficiency in Electric Mexican Enterprise: Luz y Fuerza del Centro (LyFC) as Reason for Extinction
148
the present administration;
That costs almost double its sales revenue, from 2003
to 2008 recorded sales revenue of 235.738 million pesos,
while its costs were $433.290 million pesos (including
electricity purchased from the Federal Electricity Com-
mission);
1) The percentage of total energy losses of Luz y
Fuerza del Centro is excessive and almost three times
higher than the person lodging the Federal Electricity
Commission.
In June 2009, Luz y Fuerza lost 30.6% of energy,
while that Commission lost 10.9%, almost no utility in
the world recorded the percentage of losses that presents
LyFC.
2) In 2008, Luz y Fuerza lost 32.5% of the energy
generated to buy and sell. The estimated value of these
total losses amounted to nearly 25 billion pesos, which
represents 52% of total sales revenue of the organism,
and
3) In the best case, the unit costs of the works executed
Luz y Fuerza del Centro is 176% higher than the costs of
the Federal Electricity Commission… [5].” The aim of
this paper is to analyze the organizational efficiency of
LyFC as extinction ratio by benchmarking perception
among various employees of the defunct company. It is
organized as follows: In brief, it presents the results of
international experience in the efficiency of the elec-
tricity industry, describes the most outstanding one and
briefly mentions the research methodology, and after
comparing the operating performance of the company
and stating labor versus CFE LyFC, it finally analyzed 8
variables which measure the perception of efficiency.
The determinants of efficiency in an electric utility are:
allocation of budget, technology, work organization,
material assignment, administrative efficiency, distribu-
tion networks, housing growth and external factors.
2. The International Context
After a decade of openness to investment in the elec-
tricity markets in the world, there is clear evidence of its
success or failure [6].
There are successful experiences that have been made
to increase efficiency, power quality and productivity at
the same time it has managed to attract capital and
reduce prices. There are also experiences less fortunate,
in that the continuity and quality of supply have degraded,
or prices have skyrocketed. In some cases, the State, it
was out, had to intervene directly to prevent further
damage to the national or local economy [7].
The California crisis that began when the energy
market was liberalized at the state level in 1996, meant
that in the summer of 2001 that the state suffered
blackouts of between 20 and 200 hours. With the policy
of 1996, in which energy prices were no longer under
state control, they began to be governed by the laws of
supply and demand. The speculation caused prices to
soar and they create serious problems for utility com-
panies, which had to pay a lot more for energy generating
companies, and could not move the new costs, as the
price paid by consumers remained subject to regulation
[8].
In Chile the power outages in 2001 strongly bothered
business sectors, especially in the trade and the mining
industry, for the economic losses caused by the lack of
energy. Concern mining sector concerned court implied
that each stop producing hundreds of thousands of tons
of copper, mostly. Analysts linked the sector indicated, by
way of comparison, in the court on July 25 of that year,
when the Great Northern was without power for 15 hours,
the industry lost about $7 million, which means more
than $466 .000 per hour without producing.
In Brazil, the current situation of the electricity sector
is also critical. The reason s date back to the 1980s, wh en
a cross-subsidy system was a strong disincentive to effi-
ciency improvements, and budget problems delayed in-
vestments. Despite the introduction of new legislation in
1995 aimed at enabling and attracting private capital
and the power sector, new investments in generation and
transmission that were expected until today have not
materialized in the amounts needed. While private com-
panies control 80% of the country’s distribution system,
few private investors are willi ng to take the risk of build-
ing new plants, firstly, because of the uncertainty crea ted
by the incomplete implementation of the reform and on
the other, as a result of the 1999 financial crisis, which
has increased the country’s currency risk. The situation
is far from being resolved, since only a few of the fifty or
more power stations gas ignition that the government is
promoting the Thermoelectric Priority Program can start
operating in mid-2002 [9].
3. State of Art
Efficiency, also known as productivity is generally un-
derstood as the relationship between the output obtained
by a system of production or services and the resources
used to obtain, can also be defined as the relationship
between the results and the time used to obtain them: the
shorter the time it takes to get the desired result, the more
productive the system.
In the area of professional development, efficiency is
the economic index that relates production to the re-
sources used for this production, expressed as produc-
tion/resources [10].
The term global efficiency is a concept that is used to
help improve productivity through the study and discus-
sion of the determinants of efficiency and of the elements
involved in it [11].
In reviewing the studies on the efficiency in the power
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Organizational Efficiency in Electric Mexican Enterprise: Luz y Fuerza del Centro (LyFC) as Reason for Extinction 149
sector were 118 jobs within which are the following: [12]
presented an empirical study of the determinants of
energy efficiency in the companies during the period
2005-2009, we investigated the relationship between
efficiency and productivity change of these companies,
the results of the study indicated that low productivity
growth is more related to poor performance rather than
technological changes.
[13] found that the electrical efficiency and vertical
integration in presenting an economic model for the US
business.
[14] studied the effect of the quality of performance-
based regulation through reward and penalty system
design for power distribution companies.
[15] found that the cost Benchmarking depending on
the efficiency increases with the use in the regulation of
electrical power.
[16] suggests that the efficiency of the electricity
distribution companies is evaluated under an efficiency
standpoint productive approach. The analysis methodol-
ogy consists in estimating production costs of border
with parametric and nonparametric. Two individual tech-
nical efficiency measurements of the activity distribution
of these functions are obtained.
The evaluation confirms actions and strategies that re-
sult in cost reduction in the distribution companies. An
application under the last Chilean regulatory process is
illustrated in this paper.
Proposed a new formula to decompose cost efficiency
into technical prices and allocative efficiency in an en-
vironment characterized by the fact that the input unit
prices differ between certain companies. Using a formula
to compare returns between Japanese and US electric
power companies, and found a significant difference in
efficiency based on price. However, insignificant differ-
ences were found in the technical and allocative effi-
ciency.
[17] shows in a simple and general, as it is possible to
perform mathematical modeling of the behavior of the
physical assets of companies engaged in the business of
producing electricity. From when companies achieved
without some degree of maturity, are able to apply engin-
eering to properly care for their assets, and obtain their
best performance in terms of life and improving the rate
of return on investment (ROI for its acronym in English).
The savings in resources, obtained with the application of
these tools allow companies to keep their finances healthy
trend, in terms of growth, framed by efficiency.
Additionally Martinez quantified the effects of some
of the main factors that have affected the costs of public
utilities in Mexico (lost energy, fuel and labor), noted
that the impact of rising fuel prices on Total costs of
public utilities have been important in recent years.
However, it also notes that the cost of energy losses and
the “overhead” work are significant and comparable,
overall, the impact of increased fuel prices.
4. Research Method
It is a correlational research that examines the association
between efficiency and budget allocation, technology,
organization of work, allocation of materials, adminis-
trative efficiency, distribution networks, housing growth
and external factors.
As a general hypothesis is to study if there is a positive
association between:
Budget allocation, technology, work organization, al-
location of materials, administrative efficiency, distribu-
tion networks, the housing sprawl, external factors were
the main variables that determined the Mexican elec-
tricity sector efficiency.
Given a confidence level of 90%, with an error level of
10% a chance of success of 50%, as the probability of
failure and a population of 35,000 elements, which are
LyFC employees. 267 effective surveys were conducted
to achieve the purposes set forth in correlational research.
The population used for lifting workers surveys were
Western Zone of the sectors that shaped western metro-
politan management pertaining to the distribution sub
both administrative, technical or operational as: linemen,
engineers, clerks, draftsmen, secretaries , reading makers,
operators, foremen, etc.
Addition, we studied the calculation of the confidence
interval based on the Student t estimating the standard
deviation of the data S and calculate the standard error of
the mean = S/(square root of n), then the confidence
interval for the mean x = average + −t (alpha/2) times (S/
(square root of n)). Since the difference of the means of
samples from two normal distributions are also normally
distributed, the distribuciónt can be used to examine
whether the difference can be reasonably assumed zero.
For practical purposes the expected value and variance
are:



 
0 and 123(( ))EtnVartnn n

 
5. Results
5.1. Comparison Operating Performance and
Working CFE and LFC
As a result, we have constructed Table 1 to compare op-
erating performance between the two power companies
that existed until December 2009. L and FC and CFE.
Following six variables: global energy loss, nonconfor-
mity per 1000, connection time, productivity per worker,
penalties for improper collection and PROFECO poor
service, sales revenues versus costs 2003-2008.
The productivity per worker in Productivity per worker
in France, 4900 MWH, Productivity per worker in Spain,
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Organizational Efficiency in Electric Mexican Enterprise: Luz y Fuerza del Centro (LyFC) as Reason for Extinction
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Table 1. Comparison of operating performance.
Operating performance variable L y F C CFE
Global energylosses 29% 10.3%
Complaints per 1000 users 5.08 (2008) 2.01 (2008)
Connection time 6.5 día 1 day
Productivity per worker LFC (Mexico) 751 MWH Productivity per worker CFE (Mexico) 2494 MWH (1)
Penalty for illegal charges and
poor service PROFECO $9,000,000 last three years (LFC) was serving
25% of the country’s population $ 1,247,896
Sales revenue versus costs 20 0 3 -2008 It recorded sales revenue of 235,738,000
The costs were $433.290 million pesos
Sources: Government IV report Presidency of the Republic, (Rodríguez 2004 Reform, 16/09/04). The Universal, October 19, 2009 citing PROFECO. Retrieved:
http://sdpnoticias.com/sdp/contenido/nacional/2009/10/19/1003/515532. Extinction Act 2009.
6900 MWH, Productivity per worker in Australia 8950
MWH.
As observed without CFE operating performance is an
example of global efficiency in all areas LyFC perfor-
mance was inferior. One of the basic arguments of the
reasons for the extinction of LyFC it is their lack of effi-
ciency and low productivity is checked against the avail-
able evidence. Although workers have been identified as
deestaloscausantes incompetence is evident that despite
enormous influence wing had the Mexican Electricians
Union (SME) throughout the management of the com-
pany, he was not managing the undertaking, so this lack
of competitiveness actually was incubating over the
years.
Figure 1. Comparison of labor productivity in electrical
companies. Source: F. Hernández, 2006.
ant parastatal France (EDF SA) and said of Italy (ENEL),
Germany (EnBW) and the UK (Scottish & SE) are one
and half times more productive. The CFE is—by far—
the most efficient of the Mexican power parastatal. Once
added workers and generating LFC, productivity Mexi-
can parastatal further sinks (one third of the productivity
of its French counterpart EDF). The low labor produc-
tivity Mexican electricity sector will be further disadvan-
taged if likened to electricity companies that have ven-
tured into the gas business. For example the German BW
more than doubles its labor productivity when adding the
energy produced by the gas business with the same work-
force (5.58 GWh to 10.15 GWh per worker per worker in
2004.
Historical studies that have been done have shown that
SME did not direct although the company was respon-
sible for its lack of flexibility and decision-making struc-
ture that by making agreements complicated assemblies
highly participatory and democratic immense that favored
the radicalization and the development of a policy of ne-
gotiation based on the premise that no union achievement
is reversed. Unlike other parastatals also have strong
collective bargaining agreements such as the Telephone
Workers Union or PEMEX and SUTERM himself who
agreed at the time to give up some gains in the interest of
management flexibility. SME in this case did not occur.
There was a period during the administration of President
Salinas that were made certain concessions in exchange
for this leader had national prominence by leading La-
bour Congress. Its management concluded however, be-
tween serious questions of corruption, was finally work-
ing base unknown [18].
Drawing on data from other countries, CFE could pro-
duce and sell the same electricity at a fraction of workers
currently occupied, although there are other factors that
make it difficult to compare the productivity of electric
companies in several countries (e.g., technologies gen-
eration used).
Although the CFE shines as an example of efficiency
in the decree of suppression, far from it, Figure 1 shows
that the largest electric company in France (EDF SA), is
two times more productive than the CFE from the point
of view of electricity vs. number of workers, the domin-
Even if these comparisons are internationally valid is
important to note that in the case of LyFC this compari-
son is somewhat questionable for two respects.
The first is that LyFC installed capacity represented
2.0 percent of the national total, 85.0 percent is CFE and

Organizational Efficiency in Electric Mexican Enterprise: Luz y Fuerza del Centro (LyFC) as Reason for Extinction 151
the remaining 13.0 percent to private licensees. In fact, to
get the demand for electricity in the central region, LyFC
acquired about 96.5 percent of total supply genereted by
Power CFE. Actually more than a power generating
company LyFC by clear decision that ruled authorities
and perhaps for lack of vision of their union, the com-
pany was actually a distributor and marketer of energy
who sold the CFE.
The second question relates to the labor dimension
with which efficiency is calculated, which as stated in the
case of CFE can try to compare that dimension with
fewer workers as in European countries are three con-
traction shapes as in the case of Mexico. (Time given,
and given work indefinitely).
5.2. Comparison of Benefits and Labor
Liabilities and CFE LyFC
One of the biggest surprises of this work is to realize that
actually benefits between the two companies do not vary
considerably and that the treatment actually given to
electrical workers in Mexico is very similar in 11 vari-
ables studied were the following: christmas box, energy
assistance, savings fund, retirement, monthly support for
transportation, rental assistance, help with pantry, over-
time, benefits covering transportation, utility and income,
labor liabilities increased salaries 2007 and 2000 and a
retiree in relation to assets. This comparison is summar-
ized in the following Table 2.
The result of the comparative analysis thus proves that
even if the privileges enjoyed by workers in the CFE, the
LyFC were superior and undoubtedly contributed to the
efficiency medar company which determined its extinc-
tion.
6. Result of Research Sovereign Efficacy
Perceptions
Below mentioned research questions that guided the re-
search:
PG. What are the internal and external factors that led
to the Mexican electricity sector efficiency in its distri-
bution phase Luz y Fuerza del Centro in fighting to im-
prove customer service?
HG budget allocation, technology, organization, allocation of
materials, administrative efficiency, distribution networks,
housing sprawl & external factors.
Student’s t test with all variables. 1.69E−28
Specific Research Questions
Q.1: What influence budget allocation in the Mexican
electricity sector productivity in distribution phase Distri-
bution Branch LyFC in extinction?
Q.2: How did technology impact on the Mexican elec-
tricity sector productivity in distribution phase Distribu-
tion Branch LyFC in extinction.
Q.3: How influenced the organization of work in the
Mexican electricity sector productivity in the distribution
phase Distribution Branch LyFC in extinction?
Q.4: How influenced the allocation of materials in the
Mexican electricity sector productivity in the distribution
Table 2. Performance of workers L y FC y CFE.
PERFORMANCE LyFC CFE
Christmas box 54 days of Christmas 54 days of Christmas
Energy assistance 350 kilowatt hours per month free 350 kilowatt hours per month free
Savings fund 11% of his salary, paid by the company28% onwages and overtime.
Retirement 27 years of service or age 55 with the
total performance of an active worker
25 years of service and 55 years old, or 30
years services regardless of age, women
25 years of service regardless of age
Monthly help transportation 14.5% tabulateddailywage 12.5% of their tabulated daily wage
Help for rent 39% of rentalassistance; 37% of yoursalarytabulated
Help for pantry 24.3% of thewages Retirees 19.3%
Overtime paid twice and an additional 40% if it
is Sunday or holiday days
2% more paid twice and an additional
40% if it is Sunday or holiday days
Benefits covering transport, utility and rent81.5% of the wages of workers 77.8% of the wages of workers
Increased labor liabilities 2000 and 2007 from 51% to 69%
53% to 62%. (Representing labor liabilities,
at the end of December 2007, 62.4% of the total
liabilities of the company and 31.6% of total assets).
Salary of a pensioner in relation to assets 26% higher 21% higher
Sources: Mexican Electricians Union, releases various federal agency, Center for Economic Studies of the Private Sector, consultation with various national
media. Excerpted from: http://www.desdelared.com.mx/2009/notas/091012-luz-y-fuerza.html October 13, 2009 Bank of Mexico 2008, 2008-2010 CST, the
rade Union of Workers Electrical Industry. Excelsior March 7, 2008. T
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Organizational Efficiency in Electric Mexican Enterprise: Luz y Fuerza del Centro (LyFC) as Reason for Extinction
152
phase Branch LyFC in extinction?
Q.5: How influenced Response administrative effi-
ciency research questions?
Q.6: De qué manera contribuyeron las redes de dis-
tribución en la productividad del sector eléctrico Mexi-
cano en su fase de distribución de la Subdirección de
Distribución de Luz y Fuerza delCentro en extinción?
Q.7: Qué incidencia tuvo el crecimiento de la vivienda
en la productividad del sector eléctrico mexicano en su
fase de distribución de la Subdirección de Distribución
de Luz y Fuerza del Centro en extinción?
7. Correlation Tests
Q.1: VS Budget Allocation Technology −0.056831
The correlation coefficient r product moment equals
−0.056831, therefore there is not a strong correlation or
linear dependence between the increase in the budget
allocation VS Technology, this indicates that the use of
technology does not depend on budget but on other
factors.
Q.2: VS Technology Organization at work −0.028622
The correlation coefficient r product moment is equal
to −0.028622, therefore not a strong correlation and lin-
ear dependence between the increase in VS Technology
Organization at work. This indicates that the organization
of work depends on the technology to be had according
to their planned objectives.
Q.3: VS material allocation Administrative Efficiency
0.1675746
The correlation coefficient r product moment is equal
to 0.1675746, therefore there is a strong correlation or
linear dependence between the increase in the allocation
of administrative efficiency VS materials. This represents
a greater allocation of materials attached to quality stand-
ards and will increase administrative efficiency.
Q.4: Increased capacity distribution housing VS
−0.090811
The correlation coefficient r product moment equals
−0.090811, therefore there is not a strong correlation or
linear dependence between VS Capacity Increase hous-
ing distribution. This indicates that the increase was not
considered housing according to the distribution capacity
of the entity.
Q.5: Knowledge externalities 0.116399 VS Technol-
ogy
The correlation coefficient r product moment is equal
to 0.116399, therefore there is a strong correlation or
linear dependence between the increase in the develop-
ment of Knowledge Technology VS External Factors.
Knowledge of the external factors permit an increase in
the use of technology commensurate with the growth of
user needs.
Q.6: Increase Administrative Efficiency housing VS
0.0883898
The correlation coefficient r product moment is equal
to 0.0883898, therefore there is a strong correlation or
linear dependence between the increase in development
in administrative efficiency Increase housing VS. This
indicates that greater administrative efficiency increased
in a disorderly house no impact on the administrative
processes of the organization.
Q.7: Budget allocation 0.5473626 VS administrative
efficiency
The correlation coefficient r product moment is equal
to 0.5473626, therefore there is a strong correlation or
linear dependence between the increase in development
budget Assigned Administrative Efficiency VS. This in-
dicates that greater budget allocation will increase ad-
ministrative efficiency as they used new technologies and
strategies for increasing the same.
8. Conclusions
International experience is not conclusive about the
benefits of privatization action utilities.
The comparison of operating performance and work-
loads receiving Mexican utilities shows that CFE is very
inefficient, and labor charges and benefits were higher in
LyFC and were certainly one reason for its extinction.
The findings with the available empirical evidence
allow us to point out that the budget allocation variables,
technology, work organization, material assignment, ad-
ministrative efficiency, distribution networks, housing
growth and other external factors mentioned directly in-
fluence the efficiency of L y F extinct.
On the other hand, the association tests performed
show that no budget allocation fueled technological im-
provement, and the technology is not positively associa-
ted with the organization of work; allocation of materials
not associated with administrative efficiency; distribution
capacity not expanded to the extent that increases hous-
ing in the downtown area, and the external factors impact
on the improvement of technology. The efficiency did
not address the housing growth that was generated and
the only positive assessment was budget allocation allow-
ing him to survive on the deficit that was operated by
Light and Power of the Center in the last years of his
administration. The great social lesson for unions is that
at the same time fighting for the benefits and conditions
of its members should monitor aspects such as invest-
ment and technology, expansion of productive capacity
and overall efficiency, as this determines the survival of
the company.
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