MEXICO Law and Practice Contributed by: Bernardo Cortés and Fernando Quesada, Cortés Quesada Abogados, S.C.
Cortés Quesada Abogados, S.C. Av. Santa Fe 505 Fl. 1 MZ 2B Santa Fe Cuajimalpa Cuajimalpa, 05348 Mexico City Mexico
Tel: +52 55 5293 9360 Fax: +52 55 5293 9360 Email: contacto@cortesquesada.com.mx Web: www.cortesquesada.com.mx
1. Structure and Ownership of the Power Industry 1.1 Law Governing the Structure and Ownership of the Power Industry The Mexican power sector is open for (limited) private participation in specific areas, namely generation, storage and marketing activities. In contrast, transmission and distribution are exclusively reserved to the Mexican State. The sector underwent significant transforma- tion in 2024 as a result of a constitutional reform passed by Congress. This reform reversed key elements of the 2013 reform, now imposing certain limitations on the participation of private investors in generation and marketing activities, and transforming the Federal Electricity Com- mission (CFE), the State-owned power utility, into a vertically integrated monopoly with pref- erential rights in power generation and market- ing activities. Under the new framework, private participation in generation activities is capped at a maximum of 46% of the relevant market, and the Mexican State reserves the remaining 54%, either through
CFE or other State-affiliate mechanisms. Other activities were maintained as being exclusively reserved for the Mexican State, such as nuclear power, transmission and distribution. The National Electric System (NES), integrated by the National Transmission Grid and the Gen- eral Distribution Grids, continues to be owned by CFE and operated by the National Centre of Energy Control (CENACE), as the independent system operator under government oversight. CENACE also manages the Wholesale Electricity Market (WEM), created in 2014 to foster com- petitive mechanisms for power trading based on a so-called “economic dispatch” model. The model prioritised low variable cost generation in the dispatch process to the NES; however, rules were changed with the 2024 reform in order to introduce the concept of a “load economic dis- patch” mechanism that factors in not only varia- ble costs but also operating, safety and reliability restrictions. This adjustment results in a limit- ing effect on the previous preferential dispatch model of renewal energy sources, considering their variable generation profiles.
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