On January 27, 2016, Mexico launched its wholesale electric market, with day-ahead pricing. The market initially opened only in the northern Baja peninsula region but has gradually expanded elsewhere. Additionally, real-time pricing has been added and the first electric power generation auction is scheduled for March 31. Centro Nacional de Control de Energía (CENACE), the independent transmission operator, is also planning to hold auctions for financial transmission rights and capacity in late 2016 and early 2017, respectively. All of these changes are part of Mexico's ongoing efforts to reform its energy sector with market liberalization and private investment.
While early, the initial results of the wholesale market have been generally well-received. Published prices are, in many cases, lower than the traditional generating costs of the Mexican state utility, Comisión Federal de Electricidad (CFE), and consistent with marginal costs. Many outside experts believe the successful launch of the wholesale market is an essential step in encouraging the private investment necessary to increase Mexico's generating capacity. According to the Mexican Energy Ministry, the country will need to add 7,533 MW of generating capacity by 2040, most of it in the form of public-private partnerships with CFE, which currently lacks the capital and technical knowledge to develop the electric market on its own.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
