Chihuahua, Chih., March 11, 2021.

Dear friends and clients,

We hereby inform you that on March 8th the amendment to the Electricity Industry Law was published in the Federal Official Gazette, whose bill submitted by the President Andrés Manuel López Obrador was approved by the House of Representatives and the Senate with minor modifications.

As previously disclosed in the newsletter “Amendment initiative to the Electricity Industry Law“, the amendment modifies rules for the dispatch of Power Plants and prioritizes the Federal Electricity Commission (Comisión Federal de Electricidad “CFE”) over private generators.

Within the modifications made to the bill, you may find that the order of energy dispatch foreseen in said bill was not expressly included, whereby priority was given first, to the CFE’s hydroelectric generating plants; secondly, to the other CFE’s plants; thirdly, to wind and solar energy from private companies; and finally, to combined cycle plants (plants that operate from a gas and steam cycle) from independent producers. Instead, priority is given to all CFE’s Legacy Power Plants, and to External Legacy Power Plants, regardless of the technology and cost. As previously stated, this jeopardizes the delivery foreseen within electricity supply agreements entered into prior the amendment.

Additionally, it should be noted that the Ministry of Energy, the Energy Regulatory Commission and the National Energy Control Center will have a term of 6 months to carry out all the necessary modifications to the electric energy regulations in order to adapt them to the amendment.

Furthermore, it is important mention that, as a result of the approval and publication of this amendment the commercial industry will be affected by the increase in the cost of electricity, due to the modifications in the electric dispatch. In addition, the commercial sector may be affected by the potential breach of the delivery of energy to end-consumers of supply agreements.

Additionally, the filing of defense mechanisms by the affected parties, as a result of provisions contrary to law, constitutional principles and international treaties, is expected.

It is important to comment that today a Federal Court granted a provisional suspension against the entry into force of the reform to the Electricity Industry Law, it is noteworthy that it is issued with (quote) “general effects, since if granted to private individuals, this is, only for the plaintiff, this District Court would not only be granting a a competitive advantage over other participants in the electricity industry, but it could also cause distortions in said market”.

For further information on this topic, please contact Mr. Jorge Almanza Ríos, corporate partner, at the following e-mail address: jalmanza@iclmx.com