The Future of Energy Self-Supply is in Doubt

May 10, 2022

We have found that there are still questions and concerns on the part of some large consumers of electrical energy in Mexico regarding what will happen to the generating companies under the old figure of Self-Supply, now called legacy scheme. Most importantly, if they will continue to be able to continue operating -or not- and continue to satisfy the energy needs of their partners, listed in the permits granted years ago by the Energy Regulatory Commission (CRE) with which they have current contracts.

The first thing we must consider and make clear is that the Supreme Court of Justice of the Nation (SCJN) has not ruled on the alleged illegality of these Self-Supply societies.

On the other hand, in reference to the results of the analysis of unconstitutional action made by the SCJN regarding the reforms to the Electricity Industry Law (LIE) published in the Official Gazette of the Federation on March 9, 2021, we must consider that the eight votes out of 11 were not obtained to determine it unconstitutional.

Among the changes to the LIE last year, there was one that addresses the issue of Self-Supply and is the one that added the fourth transitory article that indicates that Self-Supply permits obtained “in fraud to the law” can be revoked by the CRE through an administrative procedure and this point, along with others, were not considered unconstitutional.

We must consider that it will not be the judiciary branch in charge of reviewing whether some of them are fraudulently operating, but it’s the CRE who will be accountable for carrying out that exercise. By the way, they are the same entity that granted the Self-Supply Permits in the past.

To date, the criteria that the regulator will apply to make such a review have not been published and, above all, how they will determine which operate illegally. However, it has already been made public that, out of a total of 234, 110 are Self-Supply permits that, although the criteria are not known, they have already been labeled as “illegal”. There are indications to believe that only those companies that produce energy and consume it would be classified as “legal”.

We all need to remember that the publication of these reforms generated a series of amparos (writ of protection) that, among others, ended in general suspensions. Despite the decree reforming the LIE for all those affected, it’s important to note that the changes published for the LIE in 2021 are not applicable, and until those suspensions are terminated, the wording of the LIE published in 2014 remains in force.

The federal government, after the Chamber of Deputies rejected the ruling on the Electricity Reform at the constitutional level in April 2022, sent a message to those companies participating in the electricity Self-Supply program urged them to consider resolving this issue, by seeking to negotiate a way out and that there is a transition process in which the CFE is protected and where options are given to those who are a part of these groups. Therefore, we encourage all Consumer Partners to keep abreast of what happens at the negotiating tables, since there could be new obligations or effects in their own energy contracts (PPAs).

The points that they could seek to negotiate would be, among others, (i) the current cost of the stamp carrying, modified by the resolution of the CRE (RES/893/2020), which implied an increase of about 800% and which was the reason for many amparos; (ii) the subsistence of the energy bank, which is a kind of clearing house, in which the energy generated and not consumed in some time periods is virtually accumulated and delivered in other periods, even on different days or months and /or (iii) the possible migration of the Self-Supply permit to a market permit, which would imply for consumers the possible revision of their current PPAs.

An alternative that some large energy consumers have is to remain in Self-Supply, or continue to receive a basic service, or to seek to migrate to the Wholesale Electricity Market, where offers with competitive rates are being presented.

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