Mexico: Analysis Of Mexico’s New Electric Industry Law

Keywords: Mexico, electricity, energy, Electricity Law,

A new law (the "Electricity Law") opening the electric industry to private sector participation in generation, transmission, distribution and power marketing activities became effective on August 12, 2014. The Electricity Law is part of a set of new laws to implement the constitutional energy reform that became effective on December 21, 2013.

This legal update addresses the main features of the new Electricity Law.


The Mexican electric industry was governed by a restrictive legal framework that limited private sector participation and reserved most of the market to the state-owned Federal Electricity Commission (Comisión Federal de Electricidad or the CFE). Since 1992, private sector investment has been restricted to certain electric generation projects. Private companies could not take part in the transmission and distribution sectors, and there was no power trading market.

The CFE was vertically integrated—combining the operation of the national grid, its control of the wholesale generation market, a monopoly over transmission and distribution, and the supply to almost all Mexican customers. This structure caused inherent difficulties in adequately and efficiently supplying the electric energy demand in Mexico due, in part, to (i) CFE budgetary constraints, (ii) opaque rules for interconnection to the national grid and (iii) severe congestion, limiting transmission services. Because CFE's budget was in effect controlled by the national treasury, the CFE long ago ceased to have the financial resources to properly maintain and expand the country's electric infrastructure.

Electric tariffs in Mexico were set by the Department of Finance (Secretaría de Hacienda) and not by the Energy Regulatory Commission (Comisión Reguladora de Energía or the CRE), the industry regulator, resulting in a tariff regime more responsive to political considerations than economic realities. While the industrial and commercial sectors generally do not receive government subsidies, agricultural and residential customers have received large subsidies. Despite these subsidies, residential consumers in Mexico pay, on average, higher tariffs than the same consumers in the United States.


The Electricity Law provides separately for generation, transmission, distribution and power marketing activities.

From the regulatory side, three agencies will have primary responsibility for the sector. The Department of Energy (Secretaría de Energía or the SENER) will have the policy function; the CRE will have the regulatory function; and the CENACE, a new decentralized agency, will manage the power grid and the wholesale electric market.

The generation and wholesale of electricity will take place under a regime of free enterprise and open competition. The CFE will be just one competitor in the new generation market.

While transmission and distribution facilities will remain under state ownership, the private sector will be able to participate in the construction, operation and maintenance of such facilities.

The operation of the National Electricity System, including the new wholesale electric market, will be run by the CENACE. This agency will also regulate open and non-discriminatory access to the transmission and distribution infrastructure.

The participants in the new wholesale electric market shall be the generators, power marketing companies and large end users (or "qualified customers"). The power marketing companies may sell power to end users (which may be qualified customers or regulated customers).

Generation Sector

  • A permit from the CRE is required for the construction, ownerhip and operation by any qualified person of power plants with a generation capacity greater than or equal to 0.5 MW.
  • The permits shall also include the right to build, own and operate private interconnection lines to deliver power output to the grid.
  • Generation companies whose output cannot meet their contractual customers' energy demand will have to purchase energy in order to meet such demand (i) in the wholesale electric market or (ii) through power purchase and sale agreements (PPAs) with other generators or with power marketing companies.
  • Generation companies can, in turn, sell their electricity (i) in the wholesale electric market or (ii) by entering into PPAs with a power marketing company, with qualified customers or with other generators.
  • Participation by generation companies in power marketing activities through affiliates is not prohibited.
  • Generation companies that produce energy through renewable sources or clean technologies shall be eligible to receive tradable clean energy certificates.

Power Marketing (Suppliers)

  • To the extent a power marketing company sells power, it is called a supplier. Any qualified person may obtain a permit from the CRE to supply power to qualified or regulated customers.
  • There are three different types of suppliers: (i) basic service suppliers, (ii) qualified service suppliers and (iii) last resource suppliers.
  • The basic supply is the supply of electric power under a regulated tariff regime. Regulated customers are residential consumers and small businesses.
  • The qualified supply is provided pursuant to freely negotiated PPAs with large end users.
  • The last resource supply is provided to qualified customers in emergency cases under maximum rates.
  • Power marketing companies may purchase electric energy (i) in the wholesale electric market or (ii) through PPAs with generators or other power marketing companies. Purchase of power by power marketing companies for resale to regulated customers must be carried out through competitive bidding processes.
  • Suppliers (and qualified customers participating directly in the wholesale electric market) will be required to acquire clean energy certificates.

Qualified Customers

  • The designation as a qualified customer is attached by registration with the CRE. The applicant shall demonstrate that its existing demand exceeds certain thresholds (initially 3MW, with such threshold being reduced to 1MW by the third anniversary of the effective date of the Electricity Law).
  • A qualified customer may purchase energy (i) in the wholesale electric market or (ii) under a PPA with a generation company or a power marketing company.
  • There will be obligatory requirements for the acquisition of clean energy certificates by qualified customers that purchase energy directly in the wholesale electricity market.

Wholesale Electric Market

  • It is a spot market operated by the CENACE where generators, suppliers and qualified customers (acting directly and not through a power marketing company) are gathered for selling and buying electricity at real-time system marginal costs.
  • Generation companies must operate their units in accordance with the dispatch orders of the CENACE and coordinate their maintenance operations with the CENACE.
  • The CENACE will dispatch the system's power plants based on a merit order of ascending operating costs (regardless of their contracted capacity under PPAs), under which the lowest operating cost power plant satisfies system energy demand before the next lowest operating cost plant is dispatched.
  • The CENACE can form partnerships with private parties in order to provide auxiliary services for spot market operations.

Transmission And Distribution

  • The CFE through its affiliates (or other state-owned companies) will own the transmission and distribution lines and will provide the service of transmission and distribution of electricity. However, such entities will not directly buy or sell the electricity that flows through their lines.
  • Tariffs for transmission and distribution services will be regulated by the CRE.
  • The SENER or the CFE's affiliates may form partnerships or reach agreements (through public bidding processes) with private entities in order to carry out the financing, installation, maintenance, management, operation and expansion of transmission and distribution infrastructure.
  • Transmission and distribution grids will be under a "not unduly discriminatory open access" regime managed by the CENACE.


  • The new CFE will operate through separate affiliated companies to take part in every sector of the electricity industry.
  • The new CFE will have to compete on an equal footing with private parties in the generation and marketing of electricity, but will remain the exclusive provider of transmission and distribution services.

Clean Energy Certificates

  • The SENER will establish the criteria for issuing clean energy certificates to generators, which will relate to energy generated by clean technologies (as defined in the Electricity Law).
  • The SENER will also regulate the obligation of the suppliers and qualified consumers that participate in the spot market to acquire clean energy certificates, in proportion to energy purchased or consumed.
  • The clean energy certificates shall be negotiable.

Use Of Land

  • The transmission and distribution of electricity have a special priority over any other activities that involve the use of the surface and subsurface of lands lying within the limits of the respective projects, including hydrocabon-related activities. The affected lands are subject to legal easements for the installation of transmission and distribution networks.
  • The Electricity Law contemplates the right of occupation and use of land owned by third parties for the location, construction and operation of site-specific generation projects (ie., hydroelectric plants) and transmission and distribution facilities. The consideration for the purchase, use or occupation of land, goods or rights that are necessary for conducting these activities shall initially be negotiated directly between the interested parties. If they do not reach agreement, the industry participant may request that (i) a district judge grant a legal easement or (ii) the Ministry of Agricultural, Territorial and Urban Development conduct a mediation. Lack of agreement after the mediation may also result in the imposition of a legal easement.

National Content

The SENER will establish a minimum national content in the new projects related to the financing, construction, maintenance and operation of transmission and distribution facilities. This requirement will be subject to availability in terms of comparable quality, cost and time or performance.


The new Electricity Law establishes a legal framework for electricity-related activities in Mexico, and has structurally changed the national electric industry.

Its fundamental principles are:

  • The generation and wholesale of electricity will take place under a regime of free enterprise and open competition.
  • The CFE will no longer have a regulatory function and will not manage the electric power system.
  • Transmission and distribution networks will be managed by an independent agency under an open access regime and regulated transmission and distribution tariffs.
  • Large end users of power will be free to choose their suppliers and the terms and conditions of power supply.
  • The new law provides for mechanisms to encourage the use of clean energy sources.
  • The new law also provides for a mechanism to solve disputes concerning the required use of lands owned by third parties.

Much remains to be determined by regulations to be proposed and implemented in regard to this new law, but today there is a detailed picture of Mexico's future electric power sector.

Originally published Winter 2014

Learn more about our Energy practice.

Visit us at

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2015. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions