MEXICO Law and Practice Contributed by: Bernardo Cortés and Fernando Quesada, Cortés Quesada Abogados, S.C.
However, the construction and operation of dis- tribution facilities require environmental, social, local and municipal authorisations (similar to those applicable to generation facilities), as well as government approvals for crossroads, lands and water bodies within the jurisdiction of governmental agencies. These approvals are typically contingent on the acquisition of the cor- responding real estate rights. Note that environmental impact authorisations are not required for distribution substations located in urban, rural, industrial or touristic areas. 5.3 Terms and Conditions Imposed in Approvals to Construct and Operate Electric Distribution Facilities Environmental and social authorisations related to the construction and operation of distribution infrastructure include provisions for remediation measures, ongoing monitoring protocols and obligations tied to eventual decommissioning. 5.4 Eminent Domain, Condemnation or Expropriation Rights to Construct and Operate Electricity Distribution Facilities Distribution services are deemed to be a public utility and are therefore subject to expropriation under that designation. The LESE expressly grants eminent domain rights for the construc- tion and operation of distribution works. CFE must follow the land use and occupation procedures outlined by the LESE in order to obtain the necessary real estate rights for the development, construction and operation of distribution infrastructure. These procedures consider the
execution and ratification of real estate agree- ments before civil or agrarian courts, as well as specific compensation concepts. 5.5 Monopoly Rights for Electricity Distribution Entities CFE is the only entity allowed to provide public utility distribution services. The terms and condi- tions governing these services (including rates) are approved by the CNE (whose rules were grandfathered from the former regulator). While CFE holds exclusive rights to operate distribution services, the participation of pri- vate investment in distribution infrastructure is expected, under contractor modality. In sup- port of this, the Mexican government recently announced investments of up to USD3.79 billion for the 2025–2030 period, aimed at 97 brand new substations, 95 expansion projects for existing substations, 6,875 modernisation works and 42,221 electrification works. 5.6 Electricity Distribution System Charges and Terms of Service Distribution rates are issued and approved annually by the CNE. These rates are calculated using methodologies that ensure a reasonable return of investment and cost recovery on the operation, maintenance, financing, investment, improvement, expansion and depreciation of the GDGs, as well as accounting for both technical and non-technical losses. Market participants pay for transmission ser- vices through CENACE, which incorporates these rates into the settlement processes of the WEM. Basic supply rates also consider specific distribution costs reflected as part of the fixed capacity charges.
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