On September 25, 2020, the Second Chamber of the Mexican Supreme Court of Justice published in the Weekly Federal Judiciary Gazette the judicial criteria1 for the regulation and calculation of the basic supply final rates—the tariffs payable by CFE Basic Supplier clients, including domestic and industrial consumers.

This criteria resulted from the appeal of the amparo proceeding 1103/2019 submitted by Cameron del Pacífico, S. de R.L. de C.V. and others, where the main claim was that the rules to calculate tariffs should be provided by a general law instead of administrative provisions issued by an administrative authority.

With respect to that argument, the Supreme Court decided that Resolution No. A/064/2018 and its Sole Annex (the “Resolution”), which contain the methodology to calculate and adjust the final tariffs for basic supply issued by the Energy Regulatory Commission (“CRE”) are constitutional since the CRE has the authority to regulate tariffs as provided by the Electricity Industry Law’s (“LIE”) article 3, section LIII, 12; section IV, 138, 139 and 140; and section III; and article 144.

It is important to note that the judicial criteria is applicable to CFE Suministrador de Servicios Básicos (a state-owned affiliate company), which will determine the final tariffs for the basic supply of electricity and ultimately impact the price that end users will pay.

In this regard, the Second Chamber determined that the aforementioned articles of the LIE do not violate the principles of legality, legal certainty or legal reserve, as they clearly establish that the CRE has the power to issue administrative provisions of a general nature in order to determine and regulate the tariffs for (i) electricity transmission and distribution services, (ii) the operation of basic service providers, (iii) the operation of the National Energy Control Center and (iv) related services not included in the Wholesale Electricity Market.

The Second Chamber emphasized that the calculation model used to establish tariffs shall be published, as provided by the LIE.

The Supreme Court, in the decision, also provided that the Constitution allows regulators to deal with technical matters as long as their decisions are consistent with the guidelines provided for by the legislature.

This judgment strengthens CRE’s position, specifically with respect to the resolutions adopted during the regular meeting held on September 29, 2020, where the CRE approved the amendment of those same rules analyzed by the Supreme Court, that is, the rules regarding the calculation of the basic supply tariffs.

1 Criteria 2a.XV/2020