Amendment to the RES/390/2017 by the Energy Regulatory Commission

On October 7, 2020, the Energy Regulatory Commission (Comisión Reguladora de Energía) (CRE) published in the Federal Official Gazette a Resolution amending the General Administrative Provisions that set forth the terms for requesting authorization to modify or transfer electric power generation or supply permits, contained in Resolution number RES/390/2017. Such provisions were published in the Federal Official Gazette on April 17, 2017.

The new resolution directly impacts the permits known as self-supply and cogeneration permits.

The electricity self-supply, i.e., the possibility of generating electricity to satisfy the needs of individuals or companies (and their partners), has its origin in the amendments to the Law on Public Service of Electricity (Ley del Servicio Público de Energía Eléctrica) dated December 23, 1992, which, in the context of the entry into force of the North American Free Trade Agreement (NAFTA), granted users an alternative to the Federal Electricity Commission (Comisión Federal de Electricidad) (CFE), allowing their participation in certain activities that were not considered public service of electricity. In this sense, the 1992 law allowed private individuals to self-sufficiently supply electricity as long as a) it was not inconvenient for the country in the opinion of the Ministry of Energy; b) there were several applicants for self-supply purposes from a power plant, who would have the character of co-owners of the same or would constitute for such purpose a company whose purpose would be the generation of electric energy to satisfy all the self-supply needs of its partners; and c) the applicant made available to the Federal Electricity Commission its surplus production of electric energy.

Although the Law on Public Service of Electricity was repealed on August 11, 2014 within the framework of the energy reform that gave rise to the new Electricity Industry Law, which allowed the participation of the private sector in the generation of electricity through various additional schemes for self-supply companies, with the publication of the new law, a transitional model was set forth that allowed self-supply and cogeneration permits to coexist with those granted under the new regulations, respecting the original conditions under which the former were granted.

As a result of this resolution, the members of self-supply companies are prevented from modifying their generation permits (which, in terms of Article 29 of the Regulations to the Electricity Industry Law published in the Official Federal Gazette on October 31, 2014, could be done upon payment of the corresponding fees or benefits) to add new members not included in the original expansion plans, modify the percentages or amount of energy assigned to them, or include new load centers.

The authority has pointed out that the relevant resolution, which has been widely criticized by the industrial sector and by authorities such as COFECE, is based on the distortion of the self-supply and co-generation permits that allow new partners or beneficiaries to enter that were not included in the original project of the expansion plans and that as a result of the publication of RES/390/2017, the CRE recorded an increase in the number of requests for modification due to changes in the persons authorized as beneficiaries of electric energy (self-supply) and establishments associated with cogeneration, by increasing from 71 to 141 requests, which represented a 98% increase over the period prior to the publication of the provisions.

Should you have any questions or require advice in relation to the above, please do not hesitate to contact any of our partners or associates

Yours sincerely,

Cannizzo, Ortiz y Asociados, S.C.