On March 9, 2021, it was published in the Federal Official Gazette the bill that reforms the Electric Industry Law.
Such reform entered into force on March 10, 2021; however, the transitory provisions establish that the Ministry of Energy, the Energy Regulatory Commission, and the National Energy Control Center must harmonize the secondary regulations, such as ordinances, decrees, rulings, policies, criteria, manuals, etc. in accordance with the referred reform.
The main changes are described below:
Priority of dispatch of power plants
The dispatch order for power plants operated by the National Energy Control Center is modified (previously there was no fixed criteria) to establish the following order: 1) Hydroelectric plants; 2) Other plants of the Federal Electricity Commission (CFE), a State-owned enterprise; 3) Privately-owned Wind and Solar plants; 4) Privately-owned Combined Cycle plants.
With these changes, priority would be given to CFE’s power plants in detriment of private power plants. This is contrary to what was foreseen by the previous Electric Industry Law, which provided a balanced dispatch under conditions of efficiency, quality, reliability, continuity, safety and sustainability of the National Electric System.
Moreover, the National Energy Control Center could offer to the Legacy Power Plants and the Legacy External Power Plants with physical delivery commitment, a preferential treatment for the use of the National Transmission Network and the General Distribution Networks, which could discriminate independent and private generators from the market, consolidating the position of CFE and its power plants.
Revoking self-supply permits
In relation to the self-supply permits granted under the former Public Electric Service Law, the reform enables the Energy Regulatory Commission to revoke permits through an administrative procedure, if fraudulent procedures in its obtaining process are detected.
National Electric System planning criteria
The reform establishes that the permits granted by the Energy Regulatory Commission under the Electricity Industry Law currently in effect will be subject to the planning criteria of the National Electric System issued by the Ministry of Energy, in order to be in line with the latter.
This could result in discrimination for private power plants, as well as the creation of new arbitrary restrictions.
Clean Energy Certificates (CEL´s)
The reform allows the possibility for obtaining CEL’s to all generators that produce energy from renewable energy sources, removing the restriction that only clean generators that had entered into commercial operation as of August 14, 2014 could access said Certificates.
This could imply an oversupply CEL’s in the market, destroying the expectation of the Certificates value.
Review of the agreements entered into with Independent Power Producers
The reform orders the review of the agreements subscribed with Independent Energy Producers for the commitment of electric energy generation capacity and the purchase of energy. Such review will evaluate that said contracts comply with the requirement of profitability for the Federal Government, and in case they do not comply, such contracts must be renegotiated or terminated in advance.
We recommend keeping in mind the issues herein mentioned, since international disputes may be triggered under treaties executed by Mexico. Also, it is likely that affected energy market participants may initiate domestic legal remedies challenging the constitutionality of this reform. Moreover, it is possible that the Mexican Antitrust Commission files a constitutional controversy against this reform.
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Mexico City
March 2021
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