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The 10 most important points of the electricity reform initiative in Mexico

The following are the 10 most important points of the electricity reform initiative in Mexico that President Andrés Manuel López Obrador presented to Congress on October 1, 2021.

First

First of all, the López Obrador Administration wants the Federal Competition Commission (CFE) to regain a leading role in the electricity sector.

For this, it is established that the CFE will generate at least 54% of the national electricity consumption

Second

The National Center for Energy Control (Cenace) would be part of the CFE, in charge of coordinating the production of the company and the private participants.

Above all, Cenace now has the following powers:

  • It controls the operation of the national electricity system.
  • Designs expansion and modernization plans for transmission and distribution networks.
  • Establishes the interconnection requirements for new generation plants.
Third

The CFE will be vertically and horizontally integrated as a single body, maintaining a subsidiary and three affiliates.

Room

The National Hydrocarbons Commission (CNH) and the Energy Regulatory Commission (CRE) would disappear, with which the CFE would be in charge of granting permits and licenses to the private sector.

In particular, the CRE has these functions, among others:

  • Issues electricity generation and commercialization permits.
  • Keep track of qualified users.
  • It grants the certificates of clean energy.
  • Approves the creation of integrated pipeline transportation and storage systems for natural gas, oil and petrochemicals.
  • Authorizes the import and export of electricity.
  • Regulates transmission and distribution rates.
  • Oversees the operation of the wholesale electricity market (MEM) and the determinations of CENACE to guarantee the efficient functioning of the MEM.
Fifth

The figure of “productive company of the state” is eliminated, becoming “organism of the state”.

Sixth

It is established that the functions that the state exercises over strategic areas (including electricity) will not constitute monopolies.

Seventh

In addition, the initiative contemplates the cancellation of all generation permits and purchase and sale contracts of the private sector, including some private generation figures such as “self-supply” companies.

Eighth

Lithium and other strategic minerals are established as the domain of the nation, with the state as the only one empowered to extract them

Nineth

To approve the initiative, a qualified majority (2/3 of the total number of legislators) is required in both Houses of Congress, as well as more than 50% of the local legislatures.

Already Morena and his allied parties (PT and PVEM) control 277 seats in the Chamber of Deputies (55%). Therefore, they would need at least 57 other legislators from other parties.

Tenth

Luis de la Calle, general director of the consulting firm De la Calle, Madrazo, Mancera (CMM), believes that if the initiative is approved, Mexico would violate its free trade agreements, including the USMCA, TIPAT and TLCUEM, and their bilateral investment treaties

“The main potential violation, because this is a bill, is related to the fact that Mexico does not have the generation and commercialization of electricity reserved in the treaties,” he said.

 

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