On December 16, the Mexican Congress and the majority of the
states' legislatures approved a bill reforming the energy legal
framework (the "Energy Bill"). The Energy Bill represents
one of the major changes in the sector and is a huge step forward
toward the expansion and modernization of the industry and the
creation of important investment opportunities.
The Energy Bill modifies Articles 25, 27, and 28 of the Mexican
Constitution for the purpose of allowing private participation in
Mexico's electricity industry. Although the constitutional
amendments do not actually privatize the Federal Electricity
Commission ("CFE"), the bill primarily allows private
participation in the generation and commercialization of electric
power.
The Energy Bill sets forth four main points: (i) reduction of
electricity costs; (ii) organization of a national electrical
system based on technical and economic principles; (iii) promotion
of the electric energy sector based on joint participation by CFE
and the private sector in the generation and sale of electric power
to the public, and (iv) strengthening of the state regulatory
authority with respect to development of the electric energy sector
and the imposition of interconnection obligations, tariffs,
universal service, and electrification on its participants. The
proposal establishes that:
" Private party participation in the generation and
commercialization of electric power for the public will be allowed.
Currently, the private sector generates electric power only under
self-consumption structures, and CFE is the only company engaged in
the generation and sale of electric power for the public. With the
proposed changes, this restriction is eliminated and private
entities will be allowed to generate and distribute electric power
to the public.
" The Mexican government will maintain the exclusivity of the
national electric transmission system, ensuring access for all
electric power producers.
Although the proposal suggests amendments only to Articles 25, 27,
and 28 of the Mexican Constitution, these amendments represent a
fundamental shift in the approach to the development and use of
Mexico's abundant natural resources.
The amendments, while fundamental, are only the first step in the
process, since the Mexican Congress will have to reflect such
constitutional changes through the secondary laws, which shall be
approved in a period not exceeding 120 days after the
constitutional modifications are in force.
The secondary laws will establish the formalities and terms CFE
will need to apply in order to convert into a productive
governmental company, in accordance with those terms and
formalities.
The Energy Regulatory Commission ("Comisión Reguladora
de Energía") will be entitled to grant permits,
authorizations, and concessions for the generation and distribution
of electric energy generated by private parties. In addition, it
will be granted constitutional autonomy and will have 120 days to
appoint its commissioners, which would be elected by a proposal of
three candidates proposed by the President and considered by the
Senate.
During the 12 months after approval of the secondary laws, the
President will be required to incorporate the National Center of
Energy Control ("Centro Nacional de Control de
Energía" or "Cenace") as a decentralized
entity, since it currently is an entity under CFE structure
overseeing the electricity dispatch in Mexico. This center will be
tasked with the management of the national electric grid, operating
the wholesale electricity market to provide open and
nondiscriminatory access to the national transmission grid and
public distribution.
