MEXICO Law and Practice Contributed by: Bernardo Cortés and Fernando Quesada, Cortés Quesada Abogados, S.C.
• ancillary services (eg, operating reserves, frequency regulation, emergency start and voltage regulation). Electricity prices in the WEM are determined based on local marginal prices, which (currently) factor in the cost of energy, technical losses and transmission congestion. For such purpose, the government is transitioning toward a “Load Eco- nomic Dispatch” model, which adds operational, safety and reliability considerations to dispatch decisions and, potentially, alters the criteria for energy injections to the NES and the local mar- ginal price calculations for the short-term spot market. The “54%– 46%” electricity generation rule may also influence the determination of energy dis- patch and prices, since this requirement oper- ates over energy delivered to the NES during a relevant year. Therefore, dispatch order for years to follow could be affected if the Load Economic Dispatch distorts the proportion of energy deliv- ered in order to preserve the mandated energy mix balance. CENACE also operates an annual Balancing Capacity Market, in which Load Serving Entities (suppliers) must procure capacity through trans- actions with generators to cover the consump- tion of the loads they represent during the “100 critical hours” of the NES – ie, the most stressed periods of the year for generation reserves. The Rules of the WEM also consider the opera- tion of the CELs market, which requires Load Serving Entities to credit CELs (which evidence production from clean sources) before the CNE in proportion to the electricity consumed by their loads (currently at 13.9%). Generators can earn one CEL per MWh of power output stemming from clean sources.
To hedge against potential price volatility, mar- ket participants may enter into Electric Hedging Agreements (EHAs) for energy products. Those EHAs may also consider bilateral financial trans- actions in order to assign the receivables or accounts payable from WEM operations. CFE’s regulated services (including basic sup- ply, transmission and distribution) continue to be subject to regulated rates, determined annually by the CNE under the rules established in the previous regime. High-load consumers are still eligible to act as “qualified users” – a status that allows off-takers to receive electricity supply from “qualified sup- pliers” (public or private) under free-market con- ditions. Qualified suppliers must meet rigorous compliance, reporting and risks management requirements before CENACE, including post- ing financial guarantees and minimum hedging obligations. In some cases, major consumers may also reg- ister as market participants and transact direct- ly in the WEM, including executing EHAs with generation companies to optimise procurement strategies and manage risk exposure. 2.2 Electricity Imports and Exports Cross-border transactions of electricity are per- mitted under the LESE, subject to prior authori- sation from SENER for imports and exports of power. The NES currently has seven interconnection ties for cross-border transactions, with three neighbouring countries: • one with Belize; • one with Guatemala; and
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