Risks Are Rising In Mexico's Power Market
Three regulatory changes in seven weeks
CENACE issued an acuerdo on 29 April 2020 that suspended pre-operational tests for photovoltaic and wind plants and barred new test requests. Finished plants cannot come online. Manufacturers that had contracted supply from those plants have to find power elsewhere, on short notice, in a market where the fourth long-term auction was cancelled on 1 February 2019 and never replaced.
That is the change that got the coverage. It is also the smallest of three that landed between late April and mid-June 2020. SENER published its Acuerdo por el que se emite la Política de Confiabilidad, Seguridad, Continuidad y Calidad en el Sistema Eléctrico Nacional in the DOF on 15 May 2020. CRE revised the porteo estampilla transmission tariff charged to holders of legacy interconnection contracts, the autoabasto and cogeneración permits grandfathered from the pre-2014 regime.
For a plant director in Mexico, the porteo revision is the one that arrives on next quarter's electricity bill. La Jornada reported on 11 June 2020 that CFE Intermediación de Contratos Legados raised those porteo tariffs by 427 to 811 percent depending on voltage level. At high tension the charge went from 0.049 to 0.2785 pesos per kWh, an increase of 468 percent. If your facility takes power through a legacy autoabasto structure, that is an immediate and unhedged increase in the transmission component of your delivered cost. The commissioning suspension is an availability risk. The porteo revision is a bill.
The commissioning suspension
CENACE's position is that the measures are a temporary response to the COVID-19 epidemic and are meant to hold system reliability. No end date was set. COFECE issued a formal opinion against the acuerdo. Federal judges granted provisional suspensions against the acuerdo on 18 May 2020, and a definitive suspension was reported on 25 May 2020 (La Jornada, 18 May 2020, and Proceso, 25 May 2020).
So the legal position as of mid-June 2020 is contested rather than settled, and that is the operating problem. An amparo protects the party that filed it. It does not restore a published testing calendar for everyone else, and it does not tell a buyer when a specific plant will energize. Treat any commercial operation date supplied by a developer during this period as a forecast, and ask what protection the amparo record gives that particular plant.
The reliability policy
SENER's Política de Confiabilidad sets national policy on reliability, security, continuity and quality in the Sistema Eléctrico Nacional. It sits above CENACE's operating decisions rather than replacing them. We read its commercial significance for an industrial buyer this way. Reliability criteria become a discretionary lever over interconnection studies and dispatch treatment, applied by a system operator whose own April acuerdo is already under judicial challenge. We are not going to characterise provisions we cannot quote, and buyers with an interconnection application in progress should have counsel read the published text against their own permit conditions rather than rely on summaries.
The porteo revision, and why it is different in kind
The other two measures act on new plants and new applications. The porteo revision changes an economic term inside permits issued before the 2014 reform. Legacy interconnection contracts carried a preferential stamp tariff for use of the transmission and distribution networks. That preference was removed. CFE's stated rationale, per La Jornada on 11 June 2020, is to align legacy contract charges with the Mercado Eléctrico Mayorista, citing 22.8 billion pesos of foregone revenue over three years.
The arithmetic is worth doing before the next budget review. The following is illustrative and not a quotation for any facility.
- Assume a plant wheeling 20 GWh a year under a legacy autoabasto structure at high tension.
- The porteo increase reported by La Jornada is 0.2785 minus 0.049, or 0.2295 pesos per kWh.
- 20,000,000 kWh at 0.2295 pesos per kWh is about 4.59 million pesos a year of new cost, before any change to the energy component.
Substitute your own wheeled volume and voltage level. The point is the order of magnitude. A cost line that was a rounding error in an autoabasto model built in 2016 is now large enough to change the ranking of supply options.
The assumption that just broke
Until this year, restrictions in Mexico's power sector applied prospectively. The cancellation of the fourth long-term auction did not disturb contracts awarded in the first three. New rules reached new projects. That pattern is what let sponsors and offtakers model legacy structures as fixed.
The porteo revision reaches backwards. Our view is that the working assumption that a pre-2014 permit is economically grandfathered no longer holds, and any model that still carries it should have it removed. This is the change we would flag to a board, ahead of the commissioning suspension, because it is quantifiable and it applies to plants that are already running.
Where the grid constraint actually sits
The stated justification for the CENACE acuerdo is grid stability under high wind and solar penetration. We have no public, dated study attributing instability in the Sistema Eléctrico Nacional to renewable share, and neither the April acuerdo nor the May policy publishes the node-level dispatch and curtailment data that would support one.
Our read is that the binding constraint is transmission capital rather than the share of wind and solar in the mix, and that a pause on commissioning does not build a single kilometer of transmission line. We would revise that view if CENACE published node-level reliability and curtailment data showing renewable output as the driver of the events the acuerdo cites. Until it does, the argument rests on an assertion, and buyers should plan around the operating facts rather than the rationale.
What to check in the next 60 days
- Whether any part of your supply comes through a legacy autoabasto or cogeneración permit, and the new porteo schedule in writing from your supplier.
- Your delivered cost per MWh recalculated with the new porteo, with energy and network charges shown separately rather than netted.
- For any PPA with a plant not yet commissioned, that plant's testing status in writing, plus the delay, force majeure and termination clauses.
- Your maximum recorded demand in kW over the last 12 months against the 1 MW threshold for Usuario Calificado status, set by the SENER acuerdo published in the DOF on 1 March 2017, if you are weighing a move from CFE Suministro Básico to suministro calificado.
- Whether the CEL component of any offer is priced separately from energy, and at what assumed cost.
Related reading: our analysis of the cancelled fourth auction and the private auctions replacing it, our regulatory policy analysis, and how we structure energy procurement for industrial facilities.
Quantify your exposure before the next billing cycle
Mexico Energy Partners can model what the revised porteo charge does to a specific facility's delivered cost per MWh and compare the result against alternative supply routes. The review needs 12 months of CFE or supplier billing, the permit or contract under which power is wheeled, and interval data where the meter records it. The review produces a cost comparison, not a guarantee of savings or of eligibility for any supply structure.