Mexico National Electric System Grid Code (Código de Red)

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May 17, 2019

Mexico National Electric System Grid Code (Código de Red)

How to Avoid Fines and Sanctions.

As of April 9, 2019 the Código de Red (Grid Code) (GC) rule established in 2016 by the Energy Regulatory Commission (CRE) went into effect. The GC rule requires all participants of the electricity market, including generators, transmission and distribution agents, as well as medium and high voltage business consumers to comply. Therefore, if you own or lead a large business, time is not on your side for compliance, since the CRE has already dispatched teams to assess how companies are responding to the new rules and enforce the policy when appropriate.

Where can you go for help?

Seek expert advice. At Acclaim Energy, we understand the requirements for compliance and have vetted key advisors who can come along side your team to conduct the analysis and development of your Codigo de red plan. The reality is that GC is not something businesses should try to address on their own, due to its complexities; which requires a thorough understanding of new and emerging technology, and the development of a comprehensive plan that needs to be developed and submitted to the CRE for approval.

What is GC and what is the objective?

The goal is to modernize the National Electric System (SEN) in the most efficient and least expensive way possible. It establishes equal conditions for all participants, so that everyone assumes some responsibility for its development. In general, it is designed to reduce the system’s current inefficiencies that have resulted in poor quality when it comes to energy distribution, reliability and higher costs for market participants.

While it is complex and challenging , it is a best practice in most electricity markets internationally. One of the key benefits, is that the GC will established standards for SEN’s operational and planning activities, as well as for the measurement, control, access and use of Mexico’s electricity infrastructure.

What is the risk a company may face if it does not comply?

If you fail to comply with the GC rules, you could receive heavy fines, the equivalent  of between 50 and 200 employee salaries, or fines from 4.4 to 17 million Mexican pesos and/or between 2% and 10% of your company’s previous year gross revenue. The penalty will be determined by the CRE and is based on your company’s degree of compliance.  In addition, failure to comply will also expose your company to higher energy costs due to low power factors (under 0.95) and a reduction in energy quality.

What steps should a company take to comply with the GC?

As shared above, engage an expert in this area. A firm that will help complete a thorough assessment of your operations and draft a written plan in collaboration with your team that will meet CRE’s approval.

This expert advisor should evaluate your company’s load centers to:

  • Define what GC requirements must be met by your company’s load points based on different areas of study. It should also include a model that carries out simulations to determine where measurements need to be taken. These measurements should analyze energy quality and review compliance with the established GC requirements.
  • In adition, they should draw up a technical report for each area of study where actions are required for compliance, just as the CRE rules stipulate.
  • Finally, they should provide proposed operational and economic solutions that will be effective, and identify redundancies to ensure compliance with the different scenarios of the electricity network[1].

How long does it take to develop a plan?

The average time to complete a plan is between 60 and 90 days, and it must be submitted to the CRE when completed. Once submitted, the plan should be followed by the purchase of the technical systems and equipment; and the installation thereof, which can take up to 9 months. Therefore, we are advising our clients and others to act expeditiously and work with a subject matter expert to avoid any possible sanctions from CRE.

Acclaim’s suggested approach is to lean on knowledgeable experts and we have identified best in class vendors who have the knowledge, experience and resources to help you produce your plan. A plan that will be executed with quality, efficiency and discipline. We are doing it for others, we can do it for you.

How much will it cost for a company to implement the GC?

The cost depends on many technical factors, including the type of industry you are in and what your energy profile is.   For example, companies in the metal-mechanical industry with activities related to metal transformation, rolling or extrusion, typically have a harder time implementing the GC due to the energy quality problems generated from using heavy machinery.

Will a company comply with the GC requirements, if it installs  new meters and communication systems based on Wholesale Electricity Market (MEM) requirements?

No! Installing new meters and communication systems will only provide partial compliance with GC requirements. More specifically, a company must also abide by the power factors and energy quality requirements specified in the GC. Compliance with the GC is a requisite and is applicable to your business if your company continues to use CFE Basic Supply.

How long does a business have to implement a plan of action to comply with the GC?

The CRE does not establish a time frame to implement a plan of action for your company, but every day a company goes without a plan  it faces the potential of heavy penalties.

However, CRE does stipulate that companies must demonstrate substantial progress in their plans of action to comply with the GC.

Be aware, he rule is now in full effect and the CRE is moving quickly to ensure its compliance. Currently, there are teams of energy compliance officers visiting customers, so don’t delay.  If you need or want to learn more about GC or or want assistance in developing a plan, contact an Acclaim representative. One call can save you from thousands of dollars in fines.

[1] The electricity network can be in three states: normal, warning, emergency.

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