Due to the constitutional reform published in the Mexican Official Gazette on December 20, 2024, the President of Mexico has sent to the Congress a set of new laws for the energy sector, such as: the Law of the State Public Enterprise, Federal Electricity Commission; the Law of the State Public Enterprise, PEMEX (Petroleos Mexicanos); the Electric Sector Law; the Hydrocarbons Sector Law; the Energy Planning and Transition Law; the Biofuels Law; the Geothermal Law; and the Law of the National Energy Commission.
The bill initiative includes reforms to the Mexican Petroleum Fund for Stabilization and Development Law, the Hydrocarbons Income Law, and the Organic Law of the Federal Public Administration.
Currently, the initiative is in the Senate of the Republic, awaiting referral to the relevant committees for analysis and discussion, before issuing a report. This report would then be debated in the Senate Plenary. Once the proposal is approved, it must be sent to the Chamber of Deputies.
According to the Mexican Constitution amendment, the Congress has a mandate that within a period of 90 calendar days, it must publish the necessary legislative adjustments to, so the energy laws are in line with the constitutional amendment, such period expires on March 21, 2025.
The parliamentary group of Movimiento Ciudadano proposed an open parliament with the participation of specialists to expand the technical analysis of the energy reform. This proposal arises since they believe that energy experts could provide specialized knowledge on topics such as energy transition, renewable sources, energy security, and others, improving the quality of the proposed laws, ensuring they are technically and legally solid.
Political party Morena maintains a simple majority in the Congress of the Union, meaning the proposal could be approved without the need for consensus from other political parties.
The most relevant aspects of the initiative are the following:
Electric Sector Law
This law repeals the Electric Industry Law and establishes that the Ministry of Energy will be responsible for granting authorizations related to the import and export of electricity. It stipulates that the State must maintain at least 54% of the average energy injected into the grid, ensuring that private entities do not dominate over the State.
The legislation incorporates the concept of energy justice and introduces regulations for new activities, such as energy storage and mobility infrastructure.
Additionally, the new law will encourage private participation in electricity generation. This participation can occur individually or in partnership with the Mexican State and encompasses various modalities, including Distributed Generation, Isolated and Connected Self-Consumption, Generation for the Wholesale Electric Market, Mixed Development or Mixed Investment, and Cogeneration. Notably, energy can be generated on-site without the requirement to inject it into the National Electric System grid.
Furthermore, the law states that permits granted under the Public Electric Energy Service Law and the Electric Industry Law will remain valid under the original terms. However, these permits cannot be extended once they expire. Holders of permits issued under the Electric Industry Law may request to transition to the new categories defined in this updated legislation.
Hydrocarbons Sector Law
This Law repeals the previous Hydrocarbons Law and aims to reduce the importation of hydrocarbons and fuels, promoting energy self-sufficiency. It introduces a new concept called the Petroleum Fee for Welfare (Derecho Petrolero para el Bienestar), which simplifies the fiscal regime by replacing three separate fees—exploration, extraction, and shared utility fees—with a single fee: 30% for oil and 11.63% for non-associated gas.
Additionally, the Law establishes new permit requirements and imposes joint responsibility on importers engaged in regulated activities.
The Law maintains that the following activities require authorization from the Ministry of Energy: treatment, refining, importation, exportation, transportation, storage, and commercialization of petroleum; importation and exportation of natural gas; importation and exportation of petroleum products. Meanwhile, the National Energy Commission will issue permits for the processing, liquefaction, regasification, decompression, transportation, storage, commercialization, and retail sale of natural gas; formulation, transportation, storage, commercialization, and retail sale of petroleum products; transportation, storage, and commercialization of petrochemicals; and the management of integrated systems.
Permit applications submitted before the law's entry into force will be resolved according to the applicable legal provisions applicable at that time. Any authorizations or permits granted by the Ministry of Energy, the National Hydrocarbons Commission, or the Energy Regulatory Commission will remain in force as originally issued.
National Energy Commission Law
This Law repeals the Law of Coordinated Regulatory Bodies in Energy Matters, creating the National Energy Commission as a decentralized agency of the Ministry of Energy. The Commission operates with technical and operational independence, absorbing the powers formerly held by the National Hydrocarbons Commission and the Energy Regulatory Commission.
It is authorized to grant various permits related to electricity, transportation, storage, and distribution through pipelines. It also has responsibilities surrounding tariffs and compensation within the sector. However, there may be confusion among market participants due to overlapping authorities between the National Energy Commission and the Ministry of Energy.
The Commission will be directed and managed by a General Directorate and will include a Technical Committee, which will ensure collaborative decision-making for enhanced transparency and performance. The head of the General Directorate will be appointed and can be removed at the discretion of the Federal Executive and must be ratified by the Senate. The Technical Committee will comprise the heads of the Ministry of Energy (who will serve as the chair with the deciding vote), the Subsecretary of Electricity, the Subsecretary of Hydrocarbons, the Electricity Unit of the Commission, the Hydrocarbons Unit of the Commission, and three technical experts from the energy sector (appointed by the Federal Executive).
On a one-time basis, within 30 calendar days following the law's enactment, the Federal Executive must directly appoint the head of the General Directorate without requiring Senate ratification, along with the three technical experts.
Energy Planning and Transition Law
This Law repeals the existing Energy Transition Law and introduces various plans aimed at developing and modernizing infrastructure in the electric and hydrocarbons sectors. It will create the National Energy Information System, which will disseminate, register, update, and organize sectoral information. The primary objective of this law is to reduce inequalities in access to and use of energy.
The Ministry of Energy is required to publish the National Energy Transition Strategy, the Energy Transition and Sustainable Energy Use Plan, the Electric Sector Development Plan, and the Hydrocarbons Sector Development Plan within a period not exceeding 365 days.
Contrary to the provisions in the Electric Sector Law, the Energy Sector Development Plan may impose restrictions on the installation, application, and operation of electric infrastructure. This could hinder flexibility in responding to a constantly changing market, as previously allowed by the new law.
State Public Enterprise Law, Federal Electricity Commission
This Law modifies the legal structure of the Federal Electricity Commission (CFE), from a productive state enterprise to a public state enterprise. The new focus prioritizes serving society and addressing public needs over maximizing profits. It introduces the concept of energy justice and eliminates subsidiaries established under the 2013 constitutional reform.
The main objective is for the CFE to provide electricity at the lowest possible cost, avoiding profit-making in service provision. The law ensures that the CFE's activities will not be deemed monopolistic, allowing it to operate under fair market conditions. The CFE is required to generate at least 54% of the electricity supplied to the National Electric System annually.
State Public Enterprise Law, PEMEX (Petróleos Mexicanos)
This Law repeals the PEMEX Law and changes the legal structure of PEMEX, from a productive state enterprise to a public state enterprise, which prioritizes service to society and meeting public needs, rather than profit maximization. Subsidiaries created under the 2013 constitutional reform are also eliminated.
It guarantees that PEMEX'S activities will not be considered monopolistic, allowing it to operate under fair conditions within the market.
Biofuels Law
This law establishes a framework for regulating and promoting the sustainable development of biofuels, encompassing not only liquid fuels but also solid and gaseous fuels. It expands and refines the roles of the Ministry of Energy, the Ministry of Environment, and the Ministry of Agriculture in relation to biomass usage as a biofuel.
Geothermal Law
This law regulates and encourages the exploration and exploitation of geothermal resources. It adopts a social approach, incorporating important concepts such as energy justice, energy poverty, and allows for exempt geothermal utilization.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
