Congress to analyze AMLO’s initiative to partially derail Mexico’s Energy Reform dealing with Power

On February 1, 2021, the President of Mexico filed an initiative at the Mexican Federal Chamber of Representatives (Cámara de Diputados Federal) to partially amend the existing Electric Industry Law (Ley de la Industria Eléctrica) (the “Initiative“).

The Initiative proposes the following amendments and actions in connection with the existing framework under the Electric Industry Law (“LIE”), among others:

1. Specific elimination of the general principle under the LIE that provides that generation and power supply services are to be performed in a free competition regime;
2. Subjecting of the granting of permits by the Energy Regulatory Commission (CRE) to the planning criteria of the National Electric System that may be issued by the Ministry of Energy (SENER);
3. Allowing  for Clean Energy Certificates (CELs) to be received by pre-energy reform (2013) power plants;
4. Introduction of the figure of “Electricity Coverage Contract with a Physical Delivery Commitment” for Basic Suppliers, which would allow firm dispatch to power plants using this figure and express priority over the dispatch of clean and renewable energy power plants;
5. Expansion of the Grandfathered Power Plant concept so that new CFE power plant projects can execute long-term coverage contracts with CFE’s Basic Supplier (CFE Suministro Básico);
6. Opening of the possibility for CFE’s Basic Supplier to execute contracts directly with generation companies without public auction requirement;
7. Confirmation that existing pre-2013 reform Self-Supply Permits may be revoked in terms of the administrative procedure set forth in such Electric Industry Law, as opposed to the procedure set forth in the pre-reform Electric Energy Public Service Law (Ley del Servicio Publico de Energía Eléctrica); and
8. Instruction to review the Firm Capacity Generation and Power Purchase Agreements executed by CFE with Independent Power Producers (Productores Independientes de Energía), known as pre-reform CFE PPAs, to confirm the compliance of the profitability requirement set forth in applicable law; if such requirement is not met, these  contracts shall be renegotiated or early terminated.

The Initiative has been filed at the Mexican Federal Chamber of Representatives (Cámara de Diputados Federal) under what are known as preferential legislative procedure rules; this will cause that the Initiative is promptly reviewed and discussed, and may potentially cause that the Initiative is formally adopted within an estimated 2 to 3 month period. However, please do note that for as long as the Initiative is not approved by both chambers of the Mexican Federal Congress (representatives and senators), is not formally promulgated by the President of Mexico and published at the Mexican Federal Official Gazette, it will not be effective.