Mexican Independent Regulatory Agencies in the Energy Sector to Be Absorbed by Ministry of Energy
On December 20, 2024, Mexico amended its Constitution to pass control of the energy sector from two independent regulators to its executive branch. Before this reform, the Energy Regulatory Commission (CRE) and the National Hydrocarbons Commission (CNH) had regulated and overseen the power and oil and gas sectors in Mexico. Both commissions had technical and budgetary autonomy, as well as a group of independent commissioners that decided relevant matters of the energy sector, including granting permits, establishing tariffs, and sanctioning market participants. Article 28 of the Constitution now grants the Federal Executive Branch specific authority to regulate and enforce policies within the energy and hydrocarbons sectors:
“The Federal Executive Branch, through the agency responsible for leading and supervising the country's energy policy (Ministry of Energy), will have the authority to carry out technical and economic regulation, as well as sanctioning powers in matters of power and hydrocarbons, under the terms determined by the law.”
Energy Regulatory Commission
The CRE will transition from an independent regulator to a decentralised agency under the Ministry of Energy. The CRE will continue to issue and oversee permits for the generation, distribution, and commercialisation of electricity and natural gas, develop technical provisions and regulations applicable to the energy markets, determine tariffs, and enforce open access to the grid and the gas distribution system.
But the CRE will now operate within the administrative framework of the Ministry of Energy. As a result, processes such as permit issuance, tariff setting, and the establishment of guidelines will become more directly aligned with the policies outlined in the government’s energy strategy. The CRE will no longer operate independently, and its decisions may be influenced by the president, which has established several regulatory changes that hinder free competition and prioritize the state utility over private parties.
National Hydrocarbons Commission
The CNH will also transition from an independent entity into a decentralised agency under the Ministry of Energy. The CNH will continue to manage and supervise upstream contracts, evaluate petroleum resources, and establish guidelines regarding exploration and production projects in Mexico.
As the CNH will no longer be an independent regulator, there is a risk that decisions taken by CNH will be politically influenced by the executive branch.
New Secondary Legislation to Be Published
Under the recent reform, Congress has 90 days to enact secondary legislation to implement the new regulatory framework. The new legislation will be published in March 2025.
CRE’s and CNH’s legal instruments, agreements, inter-institutional arrangements, and contracts will remain in force and fully compliant with the law. However, investors should start preparing for potential impacts on their projects, as these new regulatory changes may introduce additional touch points with government officials, reduce transparency in decision-making, and hinder free competition between the private sector and the state utility and national oil company.
Investors should stay informed, anticipate potential risks, and proactively adapt their business strategies. Foreign investors, in particular, should evaluate the protections available under bilateral investment treaties and free trade agreements. These instruments provide a key protection to covered investments, enabling investors to seek recourse—including compensation—through international arbitration.
