MEXICO Law and Practice Contributed by: Bernardo Cortés and Fernando Quesada, Cortés Quesada Abogados, S.C.
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) pri- vate participation in specific areas, namely generation, storage and marketing activities. In contrast, trans- mission and distribution remain exclusively reserved to the Mexican State. The sector underwent significant transformation in 2024 as a result of a constitutional reform passed by Congress. This reform reversed key elements of the 2013 energy reform, imposing certain limitations on the participation of private investors in generation and marketing activities, and transforming the Fed- eral Electricity Commission (CFE), the State-owned power utility, into a vertically integrated State public company with preferential rights in power generation and marketing activities. Under the new framework, private participation in gen- eration activities is capped at a maximum of 46% of the electricity injected into the National Electric System (NES), and the Mexican State reserves the remaining 54%, either through CFE or other projects in which the State holds an equity participation (whether through State-owned or mixed investment mechanisms). This “prevalence of the State” is measured annually and incorporated into the binding planning instruments of the sector, particularly the Electricity Sector Develop- ment Plan (PLADESE). Other activities continue to be reserved exclusively for the Mexican State, such as nuclear power, transmission and distribution. The NES, integrated by the National Transmission Grid and the General 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 competitive 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, the 2024 reform and the Regula-
tions to the Electricity Sector Law introduced the con- cept of a “load economic dispatch” mechanism that factors in not only variable costs but also operating, safety and reliability criteria. This adjustment reduces the preferential dispatch effect previously enjoyed by certain renewable generation sources, considering their variable generation profiles, and aligns dispatch decisions with the broader objective of preserving the State’s 54% participation threshold. More recently, the Ministry of Energy (SENER) issued the Guidelines for the Voluntary and Expedited Migration of Self-Supply and Cogeneration of Electric Power to the Schemes Provided under the LSE (Migration Guidelines), estab- lishing the regulatory framework for legacy self-supply and cogeneration projects developed under the for- mer Power Utility Law to migrate to the generation and supply schemes recognised under the current legal regime and participate in the WEM. In addition, all new generation projects participating in the WEM are now subject to “binding planning” criteria issued by SENER, under which permit applica- tions must align with official demand forecasts, reli- ability requirements, energy transition goals, energy justice principles, and the constitutional requirement of State prevalence in electricity generation. Failure to comply with such criteria may result in denial of the corresponding generation permit. However, pro- jects migrating under the Migration Guidelines are expressly exempt from these binding planning criteria, thereby facilitating the transition of legacy self-supply and cogeneration projects to the regulatory schemes provided under the LSE. Complementing this framework, the CNE also issued a new Methodology for Determining the Charge for the Electricity Transmission Service applicable to leg- acy self-supply and cogeneration projects remaining under the former Power Utility Law regime. Beginning on 19 October 2026, such projects will become sub- ject to a new transmission tariff methodology; projects electing to migrate under the Migration Guidelines may preserve their existing wheeling regime during the two-year migration process, subject to the applicable statutory deadlines. On the administrative front, a separate constitutional reform in 2024 resulted in an institutional restructur-
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