In a major step toward the implementation of a modern and competitive wholesale electricity market in Mexico (the “Wholesale Market”), on September 8, 2015 the Secretaría de Energía (“SENER”) published the first set of regulations establishing the Wholesale Market’s design and operating principles, and governing the marketing of electricity, ancillary services, renewable energy certificates, installed capacity and congestion revenue rights (collectively, the “Market Protocols”). SENER intends to publish practice manuals and operating guidelines by the end of 2015 to instruct market participants and further implement the Wholesale Market.[1]

The Market Protocols are subdivided into 19 sections which regulate the Centro Nacional de Control de Energia’s (“CENACE”)[2] management and operation of the Wholesale Market, the registration of market participants and provision of related security, and the provision of ancillary services to ensure the reliability of the system, among numerous other matters. This article focuses on the Wholesale Market’s design and principles, and its more significant features.

Sub-Markets and Auctions

The Wholesale Market includes hour-ahead, day-ahead and real-time markets (respectively, the “HAM”, “DAM” and “RTM”) in which participants will freely make offers to sell or purchase electric energy and ancillary services at local marginal prices. CENACE will make the determination of the optimal output of electricity needed to meet the system’s load, at the lowest possible cost, subject to transmission and other operational constraints. The Wholesale Market also includes medium and long-term markets and auctions, including:

  • a market for the sale and purchase of uncommitted capacity, which will operate on a year-ahead basis and is intended to promote the reliability of the system;
  • a market for the sale and purchase of renewable energy certificates (“RECs”), which will operate on an annual basis (or on such shorter period as determined by CRE) and be based on freely negotiated offers to sell and purchase such RECs;
  • auctions for the sale and purchase of congestion revenue rights (“CRRs”)[3] which will be held on an annual basis during the first stage of the Wholesale Market’s implementation[4] and be based on freely negotiated offers to sell and purchase such rights; and
  • auctions for the acquisition of mid-term and long-term contracts for the sale and purchase of electricity, capacity and RECs at a future date or for the making and receiving of payments based on the prices of such commodities (hedges).

Ancillary Services

All Generators (as defined in the Electricity Law) have the obligation to provide market and non-market ancillary services in the Wholesale Market to ensure the reliability and continuity of the system.[5] These ancillary services are related to primary frequency regulation (a service to be provided free of charge) and the capacity reserves of Generators. Services not included in the Wholesale Market are those related to voltage control and support, and emergency start-up, among others.

CENACE will calculate and publish all the system’s requirements for ancillary services, as well as the proportion and/or details of such requirements to be satisfied by each Generator, for each group of interconnected nodes or zone within the Wholesale Market.


The Wholesale Market is a nodal market, meaning that the prices of electricity and ancillary services are calculated locally (i.e., at specific times and delivery points) and that CENACE’s balancing of generation and demand occurs within a zone and not between zones. Once CENACE performs the economic dispatch for each sub-market, it will determine the local marginal prices for each node of the grid, which prices shall contain an energy component, a congestion component and a loss component.

In the HAM and DAM, local marginal prices are calculated by the hour and for the next hour or day of business, respectively, and are based on the offers of Generators, the demands of Qualified Users (as defined in the Electricity Law) and marketers, and scheduled bilateral transactions. In the RTM, local marginal prices are calculated every five minutes (in contrast to the standard 15 minute interval in zonal pricing) and are based on the real time conditions of the transmission system.

The price of an ancillary service included in the Wholesale Market will be calculated together with the local marginal price of electricity in the DAM and RTM and be based on the marginal costs of the dispatch. The price for an ancillary service not included in the Wholesale Market, such as voltage control and support and emergency start-up, is regulated and will be determined by CRE.

As a general rule, the cost of ancillary services required by a load serving entity (entidad responsible de carga)[6] shall be charged to such entity in the proportion of energy that its facilities consume compared to the energy consumed by all such entities in the zone. However, there will be cases (to be described in the practice manuals to be published by SENER) in which a specific portion of such costs is chargeable to the participants in the Wholesale Market whose operations require the provision of such services, but only to the extent of such requirement.

Auctions for Mid-Term and Long-Term Hedges

CENACE will administer auctions of mid-term and long-term contracts for the sale and purchase of electricity, capacity and RECs. Mid-term contracts will be limited to electricity and capacity, have three-year terms and be restricted to load zones (i.e., groups of interconnected load nodes), placing the risk of congestion on the sellers. Long-term contracts for the sale and purchase of capacity and electricity produced from renewable sources will have 15-year terms, and those applicable to RECs will have 20-year terms. In contrast to auctions for mid-term contracts, auctions for long-term contracts will take place in generation zones (i.e., group of interconnected generation nodes), placing the risk of congestion on the purchasers.

Wholesale Market participants will also be able to negotiate other hedging agreements between themselves, such as financial bilateral transactions for purposes of settlement and payment, and capacity bilateral transactions as part of the market for the balancing of capacity.

Bilateral Transactions

To facilitate the settlement of hedges in the short-term markets, Wholesale Market participants will have the ability to enter into bilateral transactions on their own, either of a financial nature or for capacity.

A bilateral transaction of a financial nature will allow a Wholesale Market participant to transfer to another Wholesale Market participant the former’s receivable (fundamentally such party’s financial responsibility) in connection with the sale of electricity or ancillary services included in the market. CENACE will then charge the transferor, and credit the transferee, an amount equal to the amount of electricity or ancillary services that is subject to the bilateral transaction, as applicable, multiplied by the price for such electricity or ancillary services. A bilateral transaction for capacity will be subject to the capacity market rules.

Availability of Natural Gas

A Generator will take all risks associated with the unavailability of natural gas for generation and be liable for all amounts due in connection with its participation in the Wholesale Market, including any penalties for a breach of its scheduled commitments related to the delivery of electricity and/or ancillary services. Conversely, CENACE will not assume any liability with respect to such unavailability unless it was unforeseeable and the direct result of Centro Nacional de Control de Gas Natural’s (CENAGAS)[7] order to reduce the consumption of natural gas, which instruction is made as a result of a critical alert in the natural gas pipeline system, and the Generator’s natural gas supply contract was executed on a firm basis, among other requirements. If such requirements are met, the Generator will avoid the imposition of penalties and be entitled to a payment by CENACE, which payment would be made from security previously given by CENACE, in an amount sufficient to recover either:

  • the costs incurred by such Generator as a result of the starting-up or ramping down of its facilities upon CENACE’s orders; or
  • the opportunity or operating costs of such Generator in excess of market prices to the extent the Generator’s facilities are dispatched out of the merit order upon CENACE’s order.

Imports and Exports

Any offer by a Wholesale Market participant to export or import electricity from, or into, the national grid must be made to CENACE, who will accept the export offers with the highest prices and the import offers with the lowest prices.

Wholesale Market participants must schedule imports and exports with CENACE through electronic ticketing or its equivalent. Non-confirming tickets will not be accepted. Notwithstanding the ticket requirement, Wholesale Market participants may offer to import electricity into the grid if it is sold into the HAM or DAM at the floor price established by SENER during the first year of the market’s operation, or thereafter by CRE. Conversely, Wholesale Market participants may offer to export electricity from the HAM or DAM if the electricity is purchased at the ceiling price established by SENER or CRE, as applicable.

No Wholesale Market participant will be allowed to acquire firm, long-term financial rights over export or import transmission routes between a node in Mexico and a receipt or delivery point abroad.

Implementation Calendar

As of the date of this article, CENACE is conducting market trials for the DAM and RTM, both of which should begin operating by December 31, 2015. The HAM is part of the second stage of the market’s implementation and will begin operating at a yet to be determined date in 2017 or 2018.

CENACE will publish the bidding guidelines for auctions of long-term hedging contracts in October 2015 and will adjudicate such contracts during the first trimester of 2016. It will publish the bidding guidelines for auctions of mid-term hedging contracts in October 2016.

CRRs acquired or to be acquired at no cost by Wholesale Market participants, who are parties to interconnection agreements that were in force as of August 11 2014 or by basic service suppliers, will be assigned by CENACE in October 2015. Market trials for auctions of all other CRRs will commence in September 2016 and the actual auctions will take place two months later. The monthly auctions of CRRs will commence in January 2017.

Market trials for the capacity market will commence in October 2016, and such market will begin operating in February 2017.

Market trials for the REC market will commence in 2018 (no month was specified), and such market will begin operating in 2018 or 2019.