On November 4th, 2016, the Ministry of Energy published in the Federal Official Gazette, the applicable terms to the subsidiaries and affiliates companies of the Federal Electricity Commission (“CFE” for its acronym in Spanish) for the allocation of assets and Agreements for power generation.

The above-referred document states or defines the power plants and other facilities that the CFE shall assign under a specific form to each of the power generation companies pursuant to 2.3.1 provision of the Terms for the Strict Legal Separation of the CFE (“TESL-CFE” for its acronym in Spanish). It also states the Agreements that each power generation company and power plants shall manage under the provided specific form. Under those agreements and in accordance to the 2.4.1 provision of the TESL-CFE, the Power Generation Companies and Power Plants shall represent in the Wholesale Electricity Market (“MEM” for its acronym in Spanish) the contracted capacity.

The Ministry of Energy –with the allocation of assets- is aiming to ensure the efficient development of the National Electric Sector, seeking the financial viability or feasibility of the Productive State-owned Subsidiary (“EPE” for its acronym in Spanish) and its affiliates (“EF” for its acronym in Spanish).

The Ministry of Energy criteria used to determine the power plants’ portfolio and the corresponding Agreements is to ensure that each one of these companies can achieve the following:

  • Participation in the MEM without having an overwhelming operation or appropriation of market power at a regional or national level, taking into account the local diversity of the demand and of the power generation, as well as the restrictions of transmission between regions. It is considered as an exception the small electrical systems referred to in the Electrical Industry Law where it is not economically viable.
  • To have similar conditions of financial sustainability and profitability, taking into account a mix of technologies, fuels, efficiencies and useful life scope or life cycle. It will be taken into account both economies of scale and its reach or scope.

The provisions contained in said document are of mandatory compliance for both the CFE as well as to their EPE and EF. The provisions will continue to be binding in the event that an EPE changes its legal status to an EF status.

Likewise, in the referenced document, it is assigned the power stations or plants to the different generation divisions that are part of CFE.

These set of provisions are crucial to allow the correct implementation of a free competition framework within the MEM. It sets forth the basis of a transition from a State monopoly into a free market scheme.

If it were the case, that the distribution is not implemented in the most suitable way, the MEM could delay considerably its main purpose of competitiveness and openness to the privates within the sector.