Chihuahua, Chih., February 5, 2021.
Dear clients and friends,
We hereby inform you some of the most relevant aspects of the preferential initiative published on the 1st of February, 2021 and submitted by the President of the Republic on January 29th, said initiative seeks an amendment to the Electricity Industry Law that aims to modify the current rules for the dispatch of Power Plants and prioritize the Federal Electricity Commission (“FEC”) over private generators.
It is important to note that, given its preferential nature, the Chamber of Deputies will have a maximum of 30 calendar days to discuss said amendment.
This initiative aims to implement a “New Energy Policy” (as such term has been defined by the current administration) and within its main consequences we would like to mention those that may be relevant for the end consumer within the electric energy supply agreements (“Supply Agreements”), both those executed under the regime prior to the electric amendment (Legacy Agreements- pursuant to the Electric Energy Public Service Law), as well as those granted under the current regime (Electricity Market – pursuant to the Electricity Industry Law), amongst which we would like to highlight the following:
- It prioritizes FEC plants in the dispatch for deliveries to the National Electric System, thus changing the “economic dispatch” regime under which electric energy is dispatched, in order to place renewable plants as third in the order of dispatch (designating hydroelectric plants as first in the order and FEC plants in second) and privately owned combined cycle plants at last, hence jeopardizing the delivery of energy within the Supply Agreements related to such Power Plants.
- This amendment foresees the possibility to review agreements executed with independent private poducers and the possibility to cancel self-supply permits issued by the Energy Regulatory Commission. This may result in the failure to comply with the obligations to deliver energy to end consumers pursuant to the Supply Agreements that contemplate self-supply schemes, thus leading to grounds for non-compliance, force majeure, changes in the law, as well as the possibility of early termination of such agreements, with the legal consequences that this entails.
Therefore, it is important to point out that such initiative establishes a series of provisions contrary to constitutional principles and international treaties, such as the right to i) a clean environment, ii) free competition and iii) non-retroactivity of laws, among others, whose provisions have been confirmed by the Federal Courts, thus it is important to emphasize that for end consumers it is possible to consider different means of appeal and/or contractual mechanisms to mitigate the effect of the amendment in case it is approved in the terms referred to above.
For further information on this topic, please contact Mr. Jorge Almanza Ríos, corporate partner, at the following e-mail address: jalmanza@iclmx.com.
