Jose Antonio Prado is a Partner for Holland &
Mexico city office
Carlos Ochoa is a Partner for Holland & Knight's
Mexico city office
Alberto Esenaro Arteaga is an Associate for Holland
Mexico city office
Under Mexico's Energy Reform of 2013, the power market
opened for private investment sector-wide. However, the Federal
Electricity Commission, or Comisión Federal de Electricidad
(CFE), is still in charge for supplying basic users (low-end
Previously, CFE generated basic supply power using its own
plants and bought power from independent power producers (IPPs),
including most recently from wind power and combined cycle plants.
These IPP capacity contracts were awarded through international
public tenders. CFE has signed more than 30 IPP contracts for a
capacity of more than 14,000 megawatts (MW). These contracts are
still in force and regulated under the legal standards of
Under the country's Power Industry Law, Mexico's
Ministry of Energy, or Secretaría de Energía (SENER),
is in charge of reorganizing CFE in business units for different
purposes so that competition can be fair among both state and
To continue with the reorganization of the basic supply market,
the Ministry of Energy issued the terms for managing the legacy
contracts. Highlights of the terms include the following:
CFE remains a party to the legacy contracts
terms and conditions of the legacy contracts remain the same,
with CFE keeping the authority to execute amendments, assign rights
and obligations, cancel charges and request early termination and
penalties under the contracts
CFE Generación V (CGV) is in charge of managing all
legacy contracts to guarantee basic supply
CGV represents legacy IPP plants into Mexico's Wholesale
Power Market (MEM), only in relation to capacity under the
CGV will guarantee payments of legacy contracts
includes the criteria, requirements and proceeding for
registering the legacy plants under the joint co-ownership
standard, or Unidad de Propiedad Conjunta (UPC).
CFE or a specially appointed subsidiary will be in charge of
the fuel supply for generation of legacy power plants
Mexico's National Center for Energy Control, or Centro
Nacional de Control de Energía (CENACE), will make the
requests to IPP in emergency conditions and for the dispatch of
related services to guarantee reliability of the National Power
CFE, its subsidiaries, CENACE and IPPs may ask SENER for
non-binding opinions on any topic not included in the terms
It is important to note that IPP plants have the option to
request a Universal Generation Permit, which implies termination of
their legacy contracts without penalties, and also have the option
to return to their original IPP contracts under certain conditions,
up to five years thereafter.
Under that perspective, the terms provide additional regulations
that allow IPPs to analyze several business strategies in order to
maximize the benefits of long-term power projects in relation to
the generation business and trading in the MEM.
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