On October 6, 2020, the Energy Regulatory Commission (“CRE,” Comisión Reguladora de Energía) approved RES/1094/2020, a resolution to amend the rules for the amendment or assignment of generation and supply permits (the “Resolution”). The Resolution was published on October 7 in the Federal Official Gazette (“DOF”) and became effective as of the next day.

The Resolution was granted with a fast track exemption to the regulatory impact analysis despite the fact that on February 18, 2020, the National Commission for Regulatory Improvement (“CONAMER,” Comisión Nacional de Mejora Regulatoria) rejected the exemption requested by CRE for a draft resolution with substantially similar terms.

The Resolution amends the legal framework applicable to holders of self-supply permits ("Permit Holders") and forbids them from including as offtakers (i) new entities, other than those previously authorized; (ii) load centers that have entered into a supply contract with CFE Suministrador de Servicios Básicos (“CFE SSB”); and (iii) load centers with an obligation to register as Qualified Users.

Within the context of the regulatory improvement process, and one day before the Resolution’s publication in the DOF, the Mexican Antitrust Commission (“COFECE,” Comisión Federal de Competencia) submitted comments to CONAMER. COFECE pointed out that the Resolution’s draft was contrary to economic competition given the Resolution (i) reduces the incentives to invest, limiting competition; (ii) limits the options of the users of the basic service; and (iii) grants exclusive advantages to CFE SSB (including the fact that any energy surplus shall be sold to CFE SSB at prices lower than the market price).

The Resolution, despite being secondary regulation that should only expand the Electricity Industry Law (“LIE,” Ley de la Industria Eléctrica), imposes restrictions on Permit Holders that were not provided by the provisional articles of the LIE.

The LIE, in its second, tenth and twelfth provisional articles, provides that the terms of the permits granted in accordance with the grandfathering regime remain valid and enforceable but may not be extended beyond their original term. The provisional regime provided by the LIE and RES/390/2017 allowed the entry and exit of offtakers; however, that is no longer possible as of October 8, 2020.

The Resolution exacerbates the situation that Permit Holders have faced in recent months due to the CRE’s delay in modifying or refusal to modify self-supply permits.

The Resolution will likely be challenged. Section 5 of the Resolution, based on article 27 of the Law on Coordinated Regulatory Bodies in Energy Matters (“LORCME,” Ley de Órganos Reguladores Coordinados en Materia Energética), provides that the Resolution may only be challenged through an indirect amparo trial. However, the Resolution does not take into account the judicial criterion issued by the Mexican Supreme Court that declared unconstitutional the limitation provided by section 27 of LORCME.