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Client Alert | Federal Congress approved the reform of the Electric Industry Law

03/09/2021

Legal News / Updates

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As anticipated by González Calvillo, on February 1, 2021, the President of Mexico sent to the Chamber of Representatives, an initiative to reform and add various provisions to the Electric Industry Law (the “Initiative”).

On February 23, the Chamber of Representatives approved the Initiative, with certain modifications, with 304 (60.8%) votes in favor, 179 (35.8%) votes against and 4 (.8%) abstentions, the Initiative was sent to the Chamber of Senators for its corresponding approval.

On March 2, the Chamber of Senators approved what was sent by the Chamber of Representatives without making any modifications, with 68 (53.1%) votes in favor and 49 (38.28%) against.

The reform was published in the Official Federal Gazette on March 9th, 2021.

The approved text considers, among others, the following amendments and additions to the Electric Industry Law (“LIE”):

  1. The regulating principle that generation and commercialization activities are provided in a regime of free competition, is eliminated;
  2. Subjects the granting of permits by the Energy Regulatory Commission (“CRE“) to the planning criteria of the National Electric System issued by the Ministry of Energy (“SENER”);
  3. Allows Clean Energy Certificates (“CELs”) to be received by pre-energy reform power plants;
  4. Includes the figure of “Electricity Coverage Contract with a Physical Delivery Commitment”, which will allow firm dispatch to power plants prioritizing this figure over the dispatch of clean and renewable energy power plants;
  5. Expands the concept of Grandfathered Power Plants so that new CFE power plant projects can enter into long-term coverage contracts with CFE’s Basic Supplier (“SSB”), without need to go through auctions;
  6. It opens the possibility for CFE’s Basic Supplier to enter contracts with any generator directly, without public auction requirement;
  7. Instructs CRE to revoke pre-existing Self-Supply Permits (pre-reform 2013) obtained “in fraud of the law” according to the corresponding administrative procedure*; and,
  8. Instructs that the Firm Capacity Generation and Power Purchase Agreements executed by CFE with independent power producers are to be reviewed to confirm the compliance of the profitability requirement set forth in applicable laws and, if such requirement is not met, these contracts shall be renegotiated or early terminated.

 

The amendments to the LIE will come into force tomorrow and will repeal all the provisions that oppose it. SENER, CRE and CENACE will have 180 calendar days to make all the necessary modifications to all agreements, resolutions, guidelines, policies, criteria, manuals, and other regulatory instruments issued in the field of electrical energy.

Once the reforms to the LIE come into force, the deadlines for the presentation of indirect amparos, controversies and constitutional actions will begin.

At González Calvillo we are prepared to provide the advice you require in relation to any issue related to the new provisions. We remain at your service for any questions or clarification in relation to the scope of this document.

Click here to read the PDF version.

*Numerals identified with an (“*”) were those modified by the Energy Commission of the Chamber of Representatives.

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