Changes to the Mexican Electrical Industry Law

On March 9, 2021, the Decree Amending and Supplementing the Provisions of the Mexican Electricity Industry Law (LIE) (the Amendment) was published in Federal Official Gazette.

The amendment takes up aspects of the failure of the national electricity system’s reliability, security, continuity and quality policy (Política de Confiabilidad, Seguridad, Continuidad y Calidad en el Sistema Eléctrico Nacional) issued by the Ministry of Energy of Mexico (SENER) on May 15, 2020, regarding the prioritization of dispatch and interconnection with the national electricity system (SEN); issuance of clean energy certificates (CEL); and generally for the benefit of the Federal Electricity Commission above other industry players.

This GT Alert provides some of the most relevant aspects of the amendment.

Sections V, XII, XVI of article 3 of the LIE are amended and a section XII bis is added, worded as follows:

“Article 3.-…

I. or IV. …

V. Grandfathered Power Plant: Power plants that are not included in a permit for the production of electric energy under the modality of self-supply, cogeneration, small production, independent production or continuous own uses, and:

a) It is the property of state agencies, entities or corporations, and

b) Whose construction and delivery are independent of the method of financing;
VI. to XI. …

XII. Power purchase agreement: Agreement between Market Participants by which an obligation is made to acquire electrical energy or Associated Products at a specified future date and time, or to make payments based on the prices thereof. Basic service providers are exclusively authorized to enter into power purchase agreements with physical delivery;

XIIa. Power purchase agreement with physical delivery: Agreement between a Basic Service Provider and a Producer by which they are bound to buy and sell electrical energy or Associated Products at a defined time and date in the future, with a commitment to physical delivery of the energy , Associated Services and Power, and for which the Generator will file with the Mexican National Center for Energy Control (CENACE) the production programs of the power plants that are part of the agreement, through tenders fixed schedules on the wholesale market, in accordance with market rules;

XIII. …

XIV. Grandfathered Basic Supply Contract: Power purchase agreement that the basic service providers will have the possibility to conclude, with prices based on the respective costs and agreements, which include the electrical energy and associated products of the grandfathered power plants and grandfathered external power plants with a physical delivery commitment”

The new grandfathered power plant definition assumes that every power plant owned by Mexico’s Federal Electricity Commission (CFE), regardless of its date of operation or method of financing, is included in this definition, thus offering all CFE power plants a different treatment from other power plants. plants.

The added definition of power purchase contract with physical delivery and the modification of the definition of acquired basic supply contract gain relevance in light of the modifications of articles 4 section VI, 26, 101 and 108 sections V and VI, which give priority to the power purchase agreement with physical delivery (only concluded by CFE) to offer electrical energy, electricity and related services to the wholesale market (MEM), as well as the use of the national transport network and the general distribution network.

Articles 4 sections I and VI, 26, 101 and 108 sections V and VI of the LIE are amended, in the following terms:

“Article 4.-…

I. Grant free access to the National Transmission Network and the General Distribution Network, in non-discriminatory terms, when technically viable;

II. at V…

VI. Offer electrical energy, electricity and related services to the wholesale market on the basis of the unit cost of production in accordance with market rules, guaranteeing, on the one hand, power purchase contracts with physical delivery and, on the other hand, the supply of clean energy, delivering said products to the national electricity grid when technically viable, subject to the instructions of CENACE.

Article 26.- Transmission Providers and Distributors are responsible for the National Transmission Network and the General Distribution Network and will operate their networks in accordance with the instructions of CENACE, which will give priority in the use of these networks for dispatch by Power Plants benefiting from rights. acquired and Power Plants benefiting from external acquired rights with physical delivery commitments. For the maintenance of the National Transmission Network and the General Distribution Network that correspond to the Wholesale Market, the Transmission and Distribution suppliers will be bound by the instructions and coordination of CENACE.

Article 101.- Based on the criteria of shipping security and economic efficiency, CENACE will determine power plant allocation and shipping, controlled demand, and import and export programs. This allocation and shipment will be executed regardless of power plant ownership, controlled demand, or import and export bids. The above takes into account power purchase agreements with physical delivery.

Article 108.- …

I. at IV. …

V Determine power plant allocation and distribution, controlled demand, and import and export programs, to meet electricity demand in the national power grid and maintain safety, reliability, quality and the continuity of the distribution of the national electricity network;

VI. Receive the offers and calculate the prices of electrical energy and Related Products that derive from the Wholesale Market, and receive the production and consumption schedules associated with the Energy Purchase Contracts with physical delivery commitments, in accordance with the Market Rules;

VII. at XXXIV. …

Articles 12 paragraph I and article 35 of the LIE are amended in the following terms:

Article 12.- …

I. Grant the authorizations referred to in this law, taking into account the criteria for the development of the National Electricity Network issued by the Ministry, and decide on their modification, revocation, assignment, extension or termination.

II. at LIII. …

Article 35.- When the works, extensions or modifications required for interconnection or connection are not included in the extension and modernization programs of the National Transmission Network and the General Distribution Network, Producers, Exempt Producers, End Users and/or the candidates for the interconnection of the Power Plants and the connections of the Load Centers may choose to execute them at their own expense or to make contributions to the Transmission and Distribution suppliers for their execution and to benefit therefrom, in accordance under the terms, conditions and calculation methodology provided for in the Regulations, or, approved by CRE, by means of general administrative provisions, according to the following procedures:

I at V…

The modification of I of Articles 4 and 35, contrary to what was previously provided for by the LIE, limits access to the National Transmission Network and the General Distribution Network by conditioning access to the technical viability and consultation of the applicant. In addition, the issuance of authorizations is subject to the planning criteria of the National Electricity Network.

Articles 53 and 126 paragraph II of the LIE are amended in the following terms:

Section 53.- Basic service providers can enter into power purchase agreements through auctions conducted by CENACE. The terms of the auctions and the awarding of power purchase contracts will be provided for by the rules of the market.

Article 126.- …

I. …

II. The Ministry will establish the criteria for its granting in favor of generators and exempt generators that produce electrical energy from clean energy. The granting of clean energy certificates to power plants will not depend on the property, nor on the date of commissioning of the latter.

III. at V…”

The amended article 53 now allows CFE (as the sole supplier of basic services), contrary to what was previously indicated, to conclude electricity purchase contracts outside of an auction. In addition, article 126 makes it possible to grant CELs to power stations which did not previously have the right to collect them.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XI, Number 74