The Energy Regulation and Markets Review - Stikeman Elliott

Mexico
Energy and Energy Transition Financing (‘the Renewable Energy Law’). The Mexican
Congress also enacted the Law of the CRE and the Law of the CNH, which establish the
scope of authority and internal organisation of each of these regulatory entities.
The executive branch has the power to issue the regulations on the laws approved
by the Mexican Congress and has thereupon issued regulations dealing with oil, natural
gas, LP gas, electric energy and renewable energy.
In addition, the CRE and the CNH are entitled to issue rules, manuals and
directives regarding matters on which they are competent to rule.
ii Regulated activities
Mexico has a closed market regulation regarding the exploitation and extraction of oil,
gas that does not come from mineral beds or reservoirs, and the different raw materials
that are deemed as basic petrochemicals (ethane, propane, butane, pentanes, hexane,
heptane and naphtha), whose extraction or production, transportation, storage, and
‘first-hand sale’ to private parties can only be carried out by the Mexican government
through subsidiaries of Pemex. Nuclear energy generation is also exclusively reserved to
the Mexican government.
The transportation, storage and supply of natural gas and liquefied petroleum gas,
as well as the production, storage and distribution of biogas, biodiesel, bioethanol or any
other bioenergetics, are regulated activities that can be carried out by private parties after
obtaining permits from the CRE.
As the Mexican Constitution deems the production and distribution of electricity
a public service that must be guaranteed to the population in general, it provides for
a state monopoly. The CFE is the public entity in charge of producing and providing
electric power throughout Mexico.
Notwithstanding the foregoing, as a result of the North America Free Trade
Agreement (NAFTA), the Mexican government amended the Electric Energy Law to
enable private participation in the production of electricity. Such amendment was,
however, focused on enabling private parties to produce electricity for self-consumption
or for its distribution to the CFE. For that purpose, the amendment to such law included
four basic new production schemes which allowed private participation:
a Independent production: private parties produce electricity and must distribute
all their power output to the CFE. In this case, the licence to be granted is subject
to a public bidding process in which technical requirements need to be met, and
price is a determining factor.
b Self-supply: private parties can generate electricity for their own consumption.
Likewise, various consumers can acquire electricity if they acquire an interest in
the producing entity;
c Cogeneration: cogeneration companies will own private facilities intended to
produce electricity to be supplied to private entities or individual establishments
associated with the cogeneration company.
d Small-scale production: private parties produce electricity with a capacity no
more than 30MW, for the sole purpose of supplying their power output to CFE.
181