Mexico’s Energy Regulatory Commission Withdraws Previously Approved Resolutions Regarding Power Supply and Storage as well as LPG Distribution

On August 12, 2020, the Energy Regulatory Commission (“CRE,” Comisión Reguladora de Energía) held an extraordinary session in which the only item in the agenda was the approval of the “Resolution through which the Energy Regulatory Commission determines the withdrawal of the publication requests in the Federal Registry of the Resolutions A/002/2019, A/005/2019, A/015/2019, A/021/2019 and A/034/2019” (“Withdrawal Resolution”).

Through the Withdrawal Resolution, the CRE approved the withdrawal of the publication request for five resolutions that promoted the participation of the private sector within the energy sector: three related to the power sector; one, to LPG; and, finally, one, to natural gas and oil. In this Legal Update, we will cover the resolutions related to the first two areas: power and LPG.

It is still unclear why the original resolutions were not published given that they were approved since 2019. Given this precedent, it is relevant to monitor other resolutions approved by the CRE but not yet published in the Federal Registry (Diario Oficial de la Federación).

1. Power Resolutions

Pursuant to article 6 of the Power Industry Law, which provides that the policy of the power industry will be implemented through the CRE to increase investment and competition and promote the diversification of the electric power generation, the CRE had approved the following resolutions, which have been withdrawn pursuant to the Withdrawal Resolution:

• On January 24, 2019, the CRE approved Resolution No. A/002/2019 (“First Power Resolution”), which amended (i) general administrative provisions regarding open access and services in the national transmission grid and the general power distribution grids and (ii) general administrative provisions that establish the conditions for power supply. The main objective of the First Power Resolution was to guarantee access to transmission and distribution grids, harmonizing the regulatory provisions and proposing detailed procedures for the suppliers and their activities.
  
  
• On January 29, 2019, the CRE approved Resolution No. A/005/2019 (“Second Power Resolution”), which established a list of the goods and services that could be offered by those that carry out power storage activities. This list included, among other items, the following:
  
  i. Energy
  ii. Capacity
  iii. Reserves (i.e., secondary, spinning, non-spinning, etc.)
  iv. Services for the deferral of transmission and distribution investments
  
  The Second Power Resolution was relevant given that its objective was to provide a valid and specific regulatory framework for power storage, promoting the performance of power storage and offering legal certainty to those who perform said activity.
  
  
• On November 29, 2019, the CRE approved Resolution No. A/034/2019 (“Third Power Resolution”, collectively with the First Power Resolution and the Second Power Resolution, the “Power Resolutions”), which approved (i) the collective consideration, applied by the basic services provider for the power offered by exempt generators to more than one load center; (ii) the model of the consideration agreement; and (iii) the request for registration/cancellation and modification of beneficiaries.
  
  The Third Power Resolution allowed the creation of energy exchange systems between individuals, under the Distributed Generation regime, which would allow an individual to sell its clean power to another individual through a basic servicer supplier.

As consequence of the withdrawal of the request for publication of the Power Resolutions, the Federal Electricity Commission (Comisión Federal de Electricidad) has been strengthened as a state monopoly.

2. LPG Resolution

Article 82 of the Hydrocarbons Law contemplates that the CRE will issue resolutions for the regulation of the activities contained in that law, including tariff regulations for the distribution of LPG through pipelines to promote an efficient development of the sector with a competitive market.

In June 2019, the CRE approved the General Administrative Provisions containing the methodology for the determination of the applicable tariffs for distribution of LPG through pipelines under Resolution No. A/021/2019 and requested its publication in the Federal Registry.

At the time that Resolution No. A/021/2019 was under discussion, it was justified as necessary to establish a methodology to determine maximum tariffs that would allow for the efficient development of pipeline distribution of LPG in Mexico and reflect the best international practices for investment, operations and the protection of users’ interests. Among its features, Resolution No. A/021/2019 reduced statutory terms for review of the tariffs, promoting open access to pipeline distributors and the lawful application of rates that meet market needs.

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For any legal questions related to these resolutions, please contact:

Vera de Gyarfas
vdegyarfas@mayerbrown.com

Francisco Mendez
fmendez@mayerbrown.com

Lilia Alonzo
lalonzo@mayerbrown.com

Betyna Almeida Covarrubias
balmeida@mayerbrown.com