July 26, 2018

Mexico Energy Regulatory Commission Issues Criteria for Capacity Auctions

Holland & Knight Alert
Carlos Ochoa

Mexico's Energy Reform, established in 2013, opened opportunities for supply and trading of energy at the Electricity Wholesale Market (Mercado Eléctrico Mayorista or MEM) and the use of national transmission lines and general distribution lines (Sistema Eléctrico Nacional or SEN), under a nondiscrimination basis.

As a part of that Reform, the National Center for Energy Control (Centro Nacional de Control de Energía or CENACE) was created to manage and operate the SEN (grid), with a set of rules to keep stability and reliability for both MEM and SEN.

One of the pillars of reliability for normal operation of the SEN is the obligation for suppliers and qualified users (1-plus megawatts) to acquire capacity.

The Energy Regulatory Commission (Comisión Reguladora de Energía or CRE) recently issued the criteria for capacity auctions that will be used for balancing the capacity of the SEN, along with other mechanisms, such as the development plan of the SEN (Programa de Desarrollo del Sistema Eléctrico Nacional or PRODESEN), long-term and mid-term auctions, and the corrective and preventive emergency protocol.

The highlights of the criteria for auctions are the following:

  • CENACE has to request the call for auction to CRE with three months' notice, in order to receive approval for auction documents
  • CENACE will be the only buyer
  • costs for organizing the auction will be acknowledge in its regulated incomes, and transferred to the Load Responsible Entities (Entidades Responsables de Carga or ERCs)
  • all type of technology is allowed
  • capacity can be offered partially or totally
  • winners of the auction need to become participants of the MEM
  • price will be according to what is set in the offers
  • payments will be made in short-term market

The criteria is presented as an additional mechanism for solving problems of capacity of the grid as whole, but reduces risk for ERCs on acquiring capacity, especially for renewables. Also, it channels a secondary market to capacity that right now runs parallel to the MEM, and solves obligations for high consumers that might have limited availability.

Holland & Knight's energy law attorneys have extensive experience on matters in the power generation industry, including a variety of projects in all type of generation plants and power auctions before CENACE. For more information, contact Holland & Knight's Mexico City office

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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