New Administration Announces Regulatory Changes in the Mexican Energy Sector

As part of the new Mexican administration's changes to the energy sector, the Mexican Energy Regulatory Commission (CRE) has issued its 2020 Regulatory Program that includes new amendments to a number of general administrative provisions' criteria and other related provisions within the scope of its mandate. This program will be executed during 2020 and 2021 and intends to focus on the following:

• Standards and verification of hydrocarbons, petroleum products and petrochemicals. These standards will include: 1) specification of quality petroleum products, 2) criteria and methodology for inspection visits, and 3) standards for measurement systems used for hydrocarbons, petroleum products and petrochemicals.
• Regulation for natural gas activities. These regulations will cover: 1) integrated storage and transport systems, 2) methodology for calculating distribution pipeline tariffs, 3) development, service and open access for distribution pipeline systems, 4) permit filings, amendments and updates for transport, storage, distribution, liquefaction, regasification, compression, decompression, retail, management of integrated systems and trade, and 5) methodology for the determination of pipeline transport and storage tariffs.
• Regulation of liquefied petroleum gas. In this market, provisions will include: 1) methodology for pipeline transport and storage tariffs, 2) replacement of portable or movable containers, 3) open access and services for pipeline transport and storage, 4) formats for storage, transport, distribution and retail permits and 5) methodology for the determination of pipeline distribution tariffs.
• Regulation of petroleum products and petrochemicals. Products in these categories include some fuels, bioenergetics and other related products, and regulations for these products will cover: 1) criteria on the extent of petroleum product and petrochemical regulations, 2) methodology for pipeline transport and storage, and 3) permit filings, amendments and updates for trade and distribution means other than pipelines and gas stations.
• Sector-wide regulation for multimodal supply in the oil and gas sectors. This regulation focuses on gas stations providing natural gas, fuel and portable containers.
• Sector-wide regulation for market caps and cross-property restrictions. Under its mandate, the CRE has authority to develop markets and define market caps, and establish cross-property and other functional and structural regulations, which are coordinated in proceedings before the antitrust agency Federal Competition Commission (COFECE) in relation to its authority in the energy markets.
• Electricity regulations. Electricity regulations are the following: 1) format contracts, methodology for considerations and technical specifications for distributed generation and clean distributed generation, 2) electricity demand control for basic supply, 3) public information to be released by participants of the market and National Center for Energy Control (CENACE), 4) accounting, operative and functional separation for market participants, 5) National Grid Code, 6) electrical installation standards, 7) contribution methodology and criteria, 8) criteria for assessing net benefit for required infrastructure for private network interconnection and addition to the grid, 9) information to be presented for requesting generation permits, 10) transfer or modification of generation and supply permits, 11) management system for clean certificates and obligation compliance, 12) ancillary services, and 13) interconnection and connection manuals and contracts.

This program will bring changes to certain business models and projects in the aforementioned sectors and activities. The program regulations are scheduled to pass regulatory impact from the National Commission for Regulatory Improvement (CONAMER).

Nevertheless, companies and individuals involved in both energy sectors, including off-takers and holders of rights of first refusal or other rights, would need to perform a red flag due diligence on the project and operational documents to confirm the extent of the changes in their projects, as well as to assess the actions to be taken and recourses available under agreements, law and treaties.

Holland & Knight attorneys have extensive experience in energy and regulatory matters for the oil and gas and electricity industries, representing both government entities and private companies, as well as permit experience for all types of activities, and antitrust proceedings in the energy markets. For more information, please contact the authors or Holland & Knight's Mexico City office.

DISCLAIMER: Please note that the energy regulation in Mexico is evolving and that the subject matter discussed may change on a daily basis. Please contact your responsible Holland & Knight lawyer for timely advice.

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.