MEXICO Law and Practice Contributed by: Bernardo Cortés and Fernando Quesada, Cortés Quesada Abogados, S.C.
ing that replaced the Energy Regulatory Commission with the National Energy Commission (CNE), which is integrated into SENER and assumes the authority for regulating activities in the power industry. This marks a departure from the previous legal framework, intend- ed to allow for a technical and independent regulatory co-ordinated agency, and reflects a broader centrali- sation of planning, permitting and market oversight functions within the federal government. The main statutes governing the Mexican power industry are: • the Electricity Sector Law (LSE); • the Energy Planning and Transition Law (LPTE); • the Law of CFE (LCFE); and • the Law of the CNE (LCNE). 1.2 Principal State-Owned or Investor-Owned Entities CFE is the main State-owned entity which, after the 2024 constitutional reform, now operates as a vertical- ly integrated State public company with constitutional preference in strategic electricity activities. The reform restructured CFE into a single consolidated entity, reintegrating its generation, transmission and distri- bution assets, as well as basic (residential) supply; previously, these activities were performed by legally and operationally independent State-productive sub- sidiaries, subject to strict separation rules following the unbundling principles introduced after the 2013 reform. Despite this consolidation, specific affiliates of CFE have retained independent legal and commercial sta- tus. These entities are primarily focused on industrial (qualified) electricity supply, natural gas marketing and representation of legacy assets. They will continue to operate as separate commercial entities, albeit under CFE’s corporate umbrella. In particular, CFE subsidiar- ies and affiliates involved in qualified supply activities continue to participate in the WEM alongside private suppliers and qualified users. A key recent development was the acquisition by the Mexican government of 13 power plants from Iberdro- la, with a total installed capacity of 8,539 MW. This acquisition was implemented through Mexico Infra-
structure Partners (MIP), an investment management vehicle backed by the Mexican government, which operates these generation assets. As a result, the Mexican State – through CFE and MIP – has control over approximately 54% of the country’s generation capacity, in line with the constitutional “State preva- lence” principle. The divestment represented 55% of Iberdrola’s asset base in the country and was later followed by the effective full exit of Iberdrola from the Mexican market through the acquisition of its remain- ing portfolio by Cox Energy. The new legal framework expressly allows the devel- opment of generation projects through mixed partici- pation schemes between CFE and private investors, under either long-term production (PLP) or mixed investment structures. These projects may include direct or indirect equity participation by CFE, asset contributions, or CFE acting as the anchor off-taker, further reinforcing its role as the principal State actor in the sector. CFE is currently undertaking a tender process in order to anchor “mixed investment” pro- jects for up to 6.5 GW. On the supply side, CFE continues to be the main supplier of electricity, with exclusive rights over basic supply subject to regulated rates. Notwithstanding this exclusivity, industrial consumers and large-scale consumers (ie, qualified users) are still able to receive electricity supply from private marketers and quali- fied suppliers under competitive, market-based con- ditions. 1.3 Foreign Investment Review Process Foreign investors and investments in the Mexican power industry are afforded the same rights, obliga- tions and legal protections as their domestic peers. The Mexican legal framework does not impose nation- ality-based restrictions on private investment; limita- tions apply on equal terms to both foreign and domes- tic investors, pursuant to applicable constitutional and statutory provisions. Key restrictions include: • a cap on private (including foreign) participation in power generation activities, limited to 46% of the electricity injected into the NES, measured under the annual State prevalence mechanism estab- lished by the LSE;
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