On February 5, 2025, Mexico’s President submitted a bill to the Senate that proposes new laws and reforms in the electric sector: the Law of the Electric Sector ("LES"), the Law of the National Energy Commission, the Law of the State Public Company, Federal Electricity Commission, the Law of Energy Planning and Transition, the Law of Biofuels, and the Law of Geothermal Energy are issued, and the Organic Law of the Federal Public Administration is modified.
The bill aims to improve energy planning, sustainability, and regulatory frameworks, as well as to strengthen the role of the State and its public entities in the sector.
The bill includes the following main aspects:
A. Institutional Structure
The National Energy Commission ("CNE", per its acronym in Spanish) is created as a decentralized body of the Ministry of Energy "SENER", per its acronym in Spanish) with technical, operational, management, and decision-making independence.
The CNE will be directed by a General Directorate appointed by the President of the Republic and ratified by the Senate (except for the first General Director, who will not require the Senate's approval).
The CNE will be in charge of granting permits and issuing regulations for the electric sector, with the approval of a Technical Committee composed of the following persons: the Minister of Energy, the Undersecretariat of Electricity and the Undersecretariat of Hydrocarbons of the Ministry of Energy, the heads of the Electricity Unit and the Hydrocarbons Unit of the Commission, and three experts from the energy sector.
To facilitate the administrative transition from the current Energy Regulatory Commission to the CNE, upon the entry into force of the Law of the CNE, the deadlines applicable to applications for permits and procedures substantiated before the former will be suspended for a period of 90 calendar days.
As a result of the constitutional reform published on October 31, 2024, which changed the legal nature of the Federal Electricity Commission ("CFE", per its acronym in Spanish) from a "State Productive Company" to a "State Public Company", this figure is recognized as a new type of parastatal entity. The CFE will be sectorized to SENER and will have its own legal personality and assets, as well as technical, operational, and management independence.
The CFE will be managed by a Board of Directors responsible for defining its policies, guidelines, and strategic vision, which will be composed of the following persons: the Minister of Energy, the Minister of Finance and Public Credit, the Minister of Environment and Natural Resources, and the Minister of Science, Humanities, Technology, and Innovation, the head of the General Directorate of Petróleos Mexicanos, and three advisors.
Among the new functions of SENER are to issue binding planning instruments for the electric sector, such as the Electric Sector Development Plan, which must ensure the reliability, continuity, and accessibility of the public electricity service with social responsibility, preserve the sovereignty and energy security of the Nation, and provide Mexicans with electricity at the lowest possible price, while promoting the energy transition in an orderly manner, and guaranteeing the “non-prevalence” of private individuals over the State1.
Other planning instruments will be the National Energy Transition Strategy, the Plan for the Energy Transition and Sustainable Energy Use, the Hydrocarbons Sector Development Plan, the National Energy Information System, and the National Atlas of Areas with Renewable Energy Potential.
Although the National Energy Control Center ("CENACE", per its acronym in Spanish) will continue to be in charge of the operational control of the National Electric System (the "Grid") and the operation of the Wholesale Electricity Market (the "Market"), in addition to the economic efficiency criterion used in the allocation and dispatch of power plants, CENACE must ensure reliability and security and consider the prevalence criterion, which requires the State to maintain at least 54% of the average energy injected into the Grid each calendar year.
[1] Prevalence is defined as 'the State's preference over private entities in generation and commercialization activities, as it is responsible for ensuring the reliability, security, continuity, and accessibility of the public electricity service.
B. Electric Sector Activities
The electric sector comprises the activities of generation, transmission, distribution, and commercialization of power, as well as the planning and control of the Grid. The planning and control of the Grid, as well as the public service of transmission and distribution of power, are exclusive strategic areas of the State. Generation and commercialization of power will be provided in a competitive regime, but without prevalence for the private sector.
Battery energy storage systems and the infrastructure and supply of electricity for electromobility are also regulated.
The CNE will be in charge of granting permits in general, while SENER will have the authority to issue permits for the export and import of energy.
B.1. Power Generation
Power generation can be carried out under various schemes, such as:
i. Distributed Generation: The cap for the installed capacity allowed under this modality is increased from <0.5 MW to <0.7 MW. For this activity, the exemption from the requirement to have a generation permit issued by the CNE is maintained.
For interconnected distributed generation, access to the Grid will be subject to technical feasibility, while production can be sold in the Market through the Basic Services Supplier (CFE) under contract models and compensation methodologies defined by the CNE.
The possibility of selling energy produced through Distributed Generation within a private network without requiring a commercialization permit, is maintained.
ii. Large-scale generation with an installed capacity ≥0.7 MW:
a. Self-consumption: Production intended to meet the generator's own consumption needs, replacing the current figure of 'isolated supply'. Power plants operating under a self-consumption regime may or may not be interconnected to the Grid. If interconnected, surpluses can be injected into the Grid for free or sold to CFE according to compensation methodologies defined by the CNE and, in the case of 'intermittent' plants, subject to having backup through electrical energy storage systems or paying for this service to CFE. Interconnected plants with an installed capacity between 0.7 MW and 20 MW will have a simplified procedure for obtaining a power generation permit from the CNE.
b. Generation for sale to the Market: Production intended for commercialization in the Market. In line with current legislation, this modality allows interconnection subject to the interconnection procedure before CENACE.
In both cases, submission of a Social Impact Statement (formerly Social Impact Assessment) and approval by the Ministry of Energy will be necessary, being the latter a requirement to start construction and operation works.
Additionally, the granting of power generation permits by the CNE will be subject to SENER’s binding planning. The granting of interconnection rights by CENACE will be subject to technical feasibility and to the reliability of the Grid not being affected, as well as to the validation of SENER.
Regardless of installed capacity, the LES foresees schemes of 'mixed development' for partnerships between the State and the private sector, namely:
i. Long-term production: All production will be exclusively destined for CFE under a long-term contract, where CFE will not contribute capital for the project's development and will have a preferential right to acquire the asset at no cost at the end of the contract. Under this scheme, power plants will be represented in the Market by CFE.
ii. Mixed investment: CFE must have a direct or indirect participation in the project of at least 54% and will have a preferential right to acquire the plant's production.
iii. Any other scheme defined by the regulations of the LES or general provisions issued by SENER.
The permits granted and contracts entered into under the Electricity Industry Law and the Public Electric Energy Service Law ("LSPEE", per its acronym in Spanish) will be respected in their terms until their validity expires.
However, for projects operating under the LSPEE, simplified mechanisms will be established to encourage their migration to the LSE regime in the event that the permit-holders so determine.
B.2. Commercialization
Commercialization includes the provision of power supply, representation of exempt generators in the Market, and transactions in the Market.
Within power supply, the modalities continue to be basic, qualified, and last resort, with the difference that the basic supply will be exclusively provided by CFE.
The exemption from requiring a commercialization permit for the resale scheme that allows an end user to supply a third party is maintained, as long as power is used within a private network.
B.3. Other regulated activities
SENER will establish through general administrative provisions the terms, conditions, and modalities in which battery energy storage systems can participate in the activities of the electricity sector, as well as the necessary permits and their requirements. Additionally, the CNE will establish compensation methodologies for the services that these systems provide to the Grid that are not included in the Market, including ancillary services, and services for transmission and distribution that contribute to the quality and reliability of the Grid.
SENER will have the authority to issue regulations on the infrastructure and electricity supply necessary for electromobility, while the CNE will establish criteria for the interconnection of the infrastructure, compensation for energy supply, and terms and conditions of use for electromobility.
C. CFE Contracts
CFE can acquire electricity and associated products through contracting mechanisms established by its Board of Directors. SENER will establish the mechanisms under which the Basic Services Supplier (CFE) may enter into electricity coverage contracts.
CFE will have a public information system on its suppliers and contractors that will be periodically updated and will contain information from the last five years of the contracts, as well as a compliance track record, including, where applicable, the extension, increase, or adjustment of these contracts.
Domestic disputes involving CFE will be under the jurisdiction of federal courts, and CFE is exempt from providing the guarantees that legal provisions require from the parties, even in cases of judicial disputes.
However, CFE may agree on alternative dispute resolution mechanisms or arbitration. Likewise, in the case of contracts that take effect or are executed abroad, CFE may agree to the application of foreign law, the jurisdiction of foreign courts in commercial matters, and enter into arbitration agreements.
D. Energy Transition
The Planning and Energy Transition Law regulates the planning and sustainable use of energy, with the aim of strengthening sovereignty, justice, and energy self-sufficiency, reducing emissions, and promoting clean energy.
The Energy Planning Council is created as a coordination and monitoring body for national energy planning and the information required for planning. The Council is composed of the Minister of Energy and its Undersecretaries, a technical secretary, and a representative from each sectorized organization (CNE, CFE, CENACE, Petróleos Mexicanos, the National Center for Natural Gas Control, the National Commission for the Efficient Use of Energy and LitioMX).
The National Energy Information System is created with the objective of recording, organizing, updating, and disseminating information from the Energy Sector.
SENER will set a minimum participation target for clean energy in power generation, which must correspond to the long-term goals established in the General Climate Change Law.
The Clean Energy Credits mechanism is maintained, but with two important changes: (i) their issuance will not depend on the commercial operation start date of power plants, and (ii) they will have a validity of 30 months from the date of issuance.
E. Special Laws
A new Biofuels Law is issued, aimed at regulating and promoting the sustainable development of biofuels as part of energy diversification and transition. The law establishes the basis for the production, distribution, commercialization, blending, storage, transportation, and use of biofuels, as well as for the certification of their quality and reduced emissions.
A new Geothermal Law is issued to regulate the exploration and exploitation of geothermal resources for the sustainable use of subsurface thermal energy. The law establishes the responsibilities of SENER as the competent authority in geothermal matters, and regulates the exploration permits and exploitation concessions, permits for sundry uses and exempt geothermal uses, and other special provisions such as joint exploitation.
F. What’s next?
The bill must be discussed and passed by both Chambers of Congress, prior to being enacted by the President.
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