The Energy Regulation and Markets Review - Stikeman Elliott

Mexico
to the CRE and the lack of available capacity at the time of denial should be supported.
Payment of connection is agreed between the parties.
Natural gas distributors are bound to extend or enlarge the systems within their
geographical zone at the request of a third party who is not a permit beneficiary, provided
the service is economically feasible. Transporters are bound to extend or enlarge their
systems at the request of a third party provided the service is economically feasible or
parties enter into an agreement to cover the cost of the pipelines or other installations
that constitute the extension or enlargement.
For serving a determined geographical zone, transportation and distribution,
permits may not be issued to one single equity unless there are efficiency and profitability
gains or it becomes necessary due to the lack of transportation infrastructure and there
are no other parties interested in undertaking a natural gas investment project.
iii Rates
The rates and process for the sale, transportation, storage and distribution of natural gas
and LP gas in Mexico are regulated by the CRE.
For the sale, distribution, transportation and storage of natural gas, rates and
prices are determined pursuant to the provisions of the Directive on Rates and Price
Transfer for Natural Gas Activities from 2007, and the Directive on Highest Prices of
Natural Gas on its First Sale to Private Parties from 2009.
Under such legal provisions the price for the first-hand sales to private parties may
be determined considering the following:
a the reference price at the Henry hub (the pricing point for natural gas futures
contracts traded on the New York Mercantile Exchange);
b the difference between the Henry hub price and the price of gas at south Texas,
United States of America; and
c transport costs between the border in Reynosa and pipelines in south Texas, which
are added, subtracted or removed depending on the balance of foreign trade of
natural gas.
The rates for distribution, storage and transportation of natural gas may be different
for each carrier or distributor and are determined by the CRE considering the market
characteristics.
In the case of the rates and prices of the first-hand sale to private parties, sale to
final consumers, storage, distribution and transportation of LP gas, the methodology to
determined them is much more complex than in the case of natural gas, since the CRE
must take into consideration several market variables.
Apart from the special or private schemes of electricity production that the
law allows, the only entity that can produce and sale energy to private individuals or
companies is the CFE; therefore, most of the energy that is supplied and used throughout
Mexico is that supplied directly by the CFE.
Energy tariffs vary depending on whether electricity is used for commercial,
industrial or residential purposes, and also the zone in which the consumer is located, and
is determined, based on proposals made by the CFE, and by the Ministry of Treasury and
Public Credit with the advice of the Ministry of Energy and the Ministry of Economy.
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