On February 13, 2020, Mexico's Regulatory Energy Commission (CRE) submitted to the Regulatory Improvement Commission (CONAMER) a draft proposed amendment (the "Draft") of the General Administrative Provisions to request amendments or assignments of generation or supply permits1 (the "Provisions"). The submission included a request for an impact regulatory (MIR)2 exemption in order to avoid the full Regulatory Impact Analysis, which could lead to a comprehensive inquiry into the possible negative effects of changing the terms of the Provisions.
The goal of the Draft was to (i) forbid permit holders of self-supply generation permits ("LSPEE3 Permit Holders") from including new consumers; and (ii) further restrict the type of consumers that could be supplied by LSPEE Permit Holders. This goal is in line with the presidential guidelines to strengthen CFE's role within the power generation industry and prevent abuses from private generators.
On February 17, 2020, CONAMER acknowledged that the Draft included restrictions on the rights of LSPEE Permit Holders and could have economic consequences because it would (i) abruptly increase costs to the permit holders; and (ii) create new, unforeseen obligations for them. In view of the foregoing, CONAMER rejected the MIR exemption and requested CRE to provide a full MIR application.
Investors currently analyzing portfolios with grandfathered projects should keep in mind that, as of today, no changes to the Provisions have come into force; however, a new draft may be submitted.
We would expect that if CRE were to present a new draft, it will likely address some of the pitfalls identified in the original draft including: (i) the retroactive application of the law, (ii) the impossibility of proving negative facts such as "not being a new power buyer within the scope of the permit"; and (iii) ambiguous language that could create uncertainty among market players.
Footnotes
1. Disposiciones Administrativas de Carácter General que establecen los términos para solicitar la autorización para la modificación o transferencia de permisos de generación de energía eléctrica o suministro eléctrico.
2. Manifestación de Impacto Regulatorio
3. Ley del Servicio Público de Energía Eléctrica
February 21 2020
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