Mexico has enacted secondary legislation that creates a competitive power market open to private investment in almost all areas.
As part of a package of nine new laws covering the energy sector and amendments to 11 existing laws, a new electric industry law (Ley de la Industria Eléctrica) came into force on 11 August 2014.
CMS and its associate law firm in Mexico, Woodhouse Lorente Ludlow S.C. (‘WLL’) advised the Mexican Ministry of Energy (the ‘SENER’) on all aspects of the electricity market reform in Mexico.
The reform was the biggest change to the Mexican electricity market in over 40 years, and the largest market reform of this scale in the world for over a decade. The Economist called it ‘the crown jewel’ in the Mexican Government’s programme of reforms1. Advising on this ground-breaking reform positions CMS at the forefront of the development of the global electricity industry.
The reform’s objectives were to reduce the price of electricity, promote competitiveness and growth and bring holistic benefits such as economic growth, higher employment levels, improving economic status and improving quality of life and accessibility to electricity in remote regions.
The reform consisted of two main parts, (i) the legal separation and restructuring of the state-owned utility company, and (ii) the creation of a brand new wholesale electricity market, allowing the private sector to generate and commercialise electricity.
This note will begin by explaining what the reform involved and then will explain how the new wholesale market operates and the role of each market participant.