Further to the constitutional reform passed by Congress in December 2013 and promulgation of the Electricity Industry Law (for further details please see "Energy sector overhaul now in effect" and "Energy reform implementing legislation: electricity and geothermal energy"), on January 11 2016 the Ministry of Energy published in the Federal Register the Terms for the Strict Legal Separation of the Federal Electricity Commission (CFE). The terms apply both vertically and horizontally.

According to the separation terms, the activities carried out by the CFE (at present, a vertically integrated monopoly) will be performed on an independent and strict legal separation basis, through either state productive subsidiaries, affiliates, business vehicles or alliances allowed under the CFE Law.

The following activities are subject to the separation terms:

  • electricity generation;
  • transmission;
  • distribution;
  • basic supply;
  • marketing (not including basic supply); and
  • provision of basic supplies (eg, natural gas and other fuels).

The separation terms prescribe that the CFE will be vertically and horizontally divided among several state productive subsidiaries or affiliates for each activity mentioned above, as follows:

  • At least four state productive subsidiaries or affiliates will be in charge of power generation activities in the wholesale electricity market.
  • One state productive subsidiary or affiliate will be in charge of all activities covered under the power purchase agreements executed with all independent electricity producers.
  • One affiliate will act as counterparty to all grandfathered interconnection agreements and will represent the holders of such agreements in the wholesale electricity market.
  • At least one state productive subsidiary will be in charge of all assets and services relating to the National Transmission Grid.
  • At least one state productive subsidiary will be in charge of all assets and services relating to the general distribution grids.
  • At least one company will provide basic supply services.
  • An unlimited number of affiliates, business vehicles or alliances will carry out marketing activities other than for basic supply (ie, qualified supply or last-resource supply).
  • An unlimited number of affiliates, business vehicles or alliances will provide basic supplies to the electricity industry.

For further information on this topic please contact Rogelio López-Velarde, Amanda Valdez, Daniela Monroy or Diego Campa at López Velarde, Heftye y Soria by telephone (+52 55 3685 3334) or email (rlopezv@lvhs.com.mx, avaldez@lvhs.com.mx, dmonroy@lvhs.com.mx or dcampa@lvhs.com.mx). The López Velarde, Heftye y Soria website can be accessed at www.lvhs.com.mx.

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