Editor’s Note: NGI’s Mexico Gas Price Index, a leader tracking Mexico’s natural gas market reform, is offering the following column by Eduardo Prud’homme as part of a regular series on understanding this process.

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Baja California is a very long peninsula, but in economic terms, especially on its southern end, the flow of goods and services have made it seem like an island. Through the port of Pichilingue in the vicinity of La Paz, this region receives by sea all kinds of basic supplies, including fuels from Mazatlán, Topolobampo and Salina Cruz. From there, goods and fuels are distributed up and down the 621-mile strip that makes up Mexico’s Baja California Sur.

The generation fleet in the area delivers energy that is consistently the most expensive in the country....