The Mexican power sector is open for (limited) private participation in specific areas, namely generation, storage and marketing activities. In contrast, transmission and distribution remain exclusively reserved to the Mexican State.

The sector underwent significant transformation in 2024 as a result of a constitutional reform passed by Congress. This reform reversed key elements of the 2013 energy reform, imposing certain limitations on the participation of private investors in generation and marketing activities, and transforming the Federal Electricity Commission (CFE), the State-owned power utility, into a vertically integrated State public company with preferential rights in power generation and marketing activities.

Under the new framework, private participation in generation activities is capped at a maximum of 46% of the electricity injected into the National Electric System (NES), and the Mexican State reserves the remaining 54%, either through CFE or other projects in which the State holds an equity participation (whether through State-owned or mixed investment mechanisms). This “prevalence of the State” is measured annually and incorporated into the binding planning instruments of the sector, particularly the Electricity Sector Development Plan (PLADESE). Other activities continue to be reserved exclusively for the Mexican State, such as nuclear power, transmission and distribution.

The NES, integrated by the National Transmission Grid and the General Distribution Grids, continues to be owned by CFE and operated by the National Centre of Energy Control (CENACE), as the independent system operator under government oversight.

CENACE also manages the Wholesale Electricity Market (WEM), created in 2014 to foster competitive mechanisms for power trading based on a so-called “economic dispatch” model. The model prioritised low variable cost generation in the dispatch process to the NES; however, the 2024 reform and the Regulations to the Electricity Sector Law introduced the concept of a “load economic dispatch” mechanism that factors in not only variable costs but also operating, safety and reliability criteria. This adjustment reduces the preferential dispatch effect previously enjoyed by certain renewable generation sources, considering their variable generation profiles, and aligns dispatch decisions with the broader objective of preserving the State’s 54% participation threshold. More recently, the Ministry of Energy (SENER) issued the Guidelines for the Voluntary and Expedited Migration of Self-Supply and Cogeneration of Electric Power to the Schemes Provided under the LSE (Migration Guidelines), establishing the regulatory framework for legacy self-supply and cogeneration projects developed under the former Power Utility Law to migrate to the generation and supply schemes recognised under the current legal regime and participate in the WEM.

In addition, all new generation projects participating in the WEM are now subject to “binding planning” criteria issued by SENER, under which permit applications must align with official demand forecasts, reliability requirements, energy transition goals, energy justice principles, and the constitutional requirement of State prevalence in electricity generation. Failure to comply with such criteria may result in denial of the corresponding generation permit. However, projects migrating under the Migration Guidelines are expressly exempt from these binding planning criteria, thereby facilitating the transition of legacy self-supply and cogeneration projects to the regulatory schemes provided under the LSE.

Complementing this framework, the CNE also issued a new Methodology for Determining the Charge for the Electricity Transmission Service applicable to legacy self-supply and cogeneration projects remaining under the former Power Utility Law regime. Beginning on 19 October 2026, such projects will become subject to a new transmission tariff methodology; projects electing to migrate under the Migration Guidelines may preserve their existing wheeling regime during the two-year migration process, subject to the applicable statutory deadlines.

On the administrative front, a separate constitutional reform in 2024 resulted in an institutional restructuring that replaced the Energy Regulatory Commission with the National Energy Commission (CNE), which is integrated into SENER and assumes the authority for regulating activities in the power industry. This marks a departure from the previous legal framework, intended to allow for a technical and independent regulatory co-ordinated agency, and reflects a broader centralisation of planning, permitting and market oversight functions within the federal government.

The main statutes governing the Mexican power industry are:

• the Electricity Sector Law (LSE);
• the Energy Planning and Transition Law (LPTE);
• the Law of CFE (LCFE); and
• the Law of the CNE (LCNE).

CFE is the main State-owned entity which, after the 2024 constitutional reform, now operates as a vertically integrated State public company with constitutional preference in strategic electricity activities. The reform restructured CFE into a single consolidated entity, reintegrating its generation, transmission and distribution assets, as well as basic (residential) supply; previously, these activities were performed by legally and operationally independent State-productive subsidiaries, subject to strict separation rules following the unbundling principles introduced after the 2013 reform.

Despite this consolidation, specific affiliates of CFE have retained independent legal and commercial status. These entities are primarily focused on industrial (qualified) electricity supply, natural gas marketing and representation of legacy assets. They will continue to operate as separate commercial entities, albeit under CFE’s corporate umbrella. In particular, CFE subsidiaries and affiliates involved in qualified supply activities continue to participate in the WEM alongside private suppliers and qualified users.

A key recent development was the acquisition by the Mexican government of 13 power plants from Iberdrola, with a total installed capacity of 8,539 MW. This acquisition was implemented through Mexico Infrastructure Partners (MIP), an investment management vehicle backed by the Mexican government, which operates these generation assets. As a result, the Mexican State – through CFE and MIP – has control over approximately 54% of the country’s generation capacity, in line with the constitutional “State prevalence” principle. The divestment represented 55% of Iberdrola’s asset base in the country and was later followed by the effective full exit of Iberdrola from the Mexican market through the acquisition of its remaining portfolio by Cox Energy.

The new legal framework expressly allows the development of generation projects through mixed participation schemes between CFE and private investors, under either long-term production (PLP) or mixed investment structures. These projects may include direct or indirect equity participation by CFE, asset contributions, or CFE acting as the anchor off-taker, further reinforcing its role as the principal State actor in the sector. CFE is currently undertaking a tender process in order to anchor “mixed investment” projects for up to 6.5 GW.

On the supply side, CFE continues to be the main supplier of electricity, with exclusive rights over basic supply subject to regulated rates. Notwithstanding this exclusivity, industrial consumers and large-scale consumers (ie, qualified users) are still able to receive electricity supply from private marketers and qualified suppliers under competitive, market-based conditions.

Foreign investors and investments in the Mexican power industry are afforded the same rights, obligations and legal protections as their domestic peers. The Mexican legal framework does not impose nationality-based restrictions on private investment; limitations apply on equal terms to both foreign and domestic investors, pursuant to applicable constitutional and statutory provisions. Key restrictions include:

• a cap on private (including foreign) participation in power generation activities, limited to 46% of the electricity injected into the NES, measured under the annual State prevalence mechanism established by the LSE;
• constitutional preference of the Mexican State, primarily through CFE, in electricity generation and basic supply activities, as well as a strategic role in mixed participation generation projects; and
• the complete exclusion of private (and thus foreign) participation in nuclear power, transmission and distribution activities, which remain under the exclusive authority of the State.

In addition, foreign investors participating in generation projects must comply with the binding planning criteria issued by SENER, including consistency with PLADESE, reliability requirements, energy transition goals, and the constitutional principle of State prevalence. Failure to satisfy these requirements may result in the denial of permits, regardless of nationality.

Foreign investors benefit from both local and international protections against government actions such as seizure, confiscation, expropriation or other regulatory measures affecting their assets.

Locally, foreign investors may resort to administrative courts to seek relief. Internationally, foreign investors are (typically) protected under the relevant bilateral investment treaties (BITs) executed and ratified by Mexico, which provide access to investor-state dispute settlement mechanisms. Mexico has ratified more than 40 BITs and has recently ratified its adherence to the ICSID Convention. The protections granted to foreign investors in Mexico under such BITs are usually the same – ie, fair and equitable treatment, national treatment, most-favoured nation clause, performance requirements and protection against expropriation (whether direct or indirect).

Mexico is also party to broader investment protection frameworks under international trade agreements, including the United States-Mexico-Canada Agreement (USMCA) and the Trans-Pacific Partnership, although investor-state dispute resolution mechanisms under such instruments are more limited than under their predecessors (such as NAFTA). Limitations include different remedies, depending on the sector and nationality of the investor.

Despite not being party to the ICSID Convention until recently, Mexico has been a prominent participant in international investment arbitration, with approximately 50 procedures (most of them governed by Chapter XI of the North American Free Trade Agreement).

The international investment protection obligations assumed by Mexico provide foreign investors with a number of benefits and remedies intended to secure the legal certainty of their investments in Mexico; however, the scope and applicability of these protections may vary, depending on the specific structure, nationality and characteristics of each investment.

The sale of power assets or businesses is subject to regulatory authorisations, as well as pre-merger control clearance. The LSE (and its relevant regulations) governs the transfer of permits, while the Federal Law of Economic Competition (LFCE) establishes the relevant rules and procedures on merger control.

From a regulatory standpoint, the CNE has authority to approve or deny the assignment of power generation, storage or supply permits, changes of control within permit holders, and the migration of legacy permits into the new regulatory modalities established under the LSE. It is worth noting that power activities (including fuel supply) are subject to strict legal separation requirements, which are designed to prevent vertical integration that could distort market dynamics and free competition principles. These restrictions are particularly relevant in transactions involving generation assets combined with supply, fuel marketing or large qualified-user portfolios.

On the antitrust front, the sale of power assets may be subject to approval by the federal antitrust agency. Thresholds are determined based on the value of the transaction and/or the parties’ market power, as established in the LFCE. This is particularly relevant in transactions involving large generation portfolios, strategic transmission-adjacent assets, or acquisitions involving qualified supply activities anchoring hedging agreements with generation assets.

The Mexican legal regime on economic competition is also undergoing material changes due to the replacement of the Federal Economic Competition Commission (COFECE) (as an independent antitrust agency) with the National Antitrust Commission (CNA), a new public instrumentality under the Ministry of Economy, having authority on economic competition matters.

In addition, mixed participation projects involving CFE under PLP or mixed investment structures may be subject to specific review not only from a competition perspective, but also from a strategic planning and public policy standpoint, particularly where the transaction involves CFE equity participation, strategic infrastructure, or projects designated as priority under PLADESE.

SENER is the policy maker in charge of strategic planning in the Mexican power sector. In addition to its traditional policy role, SENER now exercises significantly broader authority over permitting, project prioritisation and market oversight following the 2024 constitutional reform and the enactment of the LSE.

SENER’s planning authority has assumed a central role in the development of energy projects as a result of the 2024 constitutional reform. The LSE and the LPTE introduce the concept of “binding planning”, which requires both regulatory authorities and market participants to adhere to the official strategies, programmes and objectives of the government through SENER for the construction, installation and improvement of power infrastructure. These are outlined in the PLADASE.

PLADESE is issued by SENER each year, with a 15-year outlook for the national electricity system, and contains three- to five-year investment programmes for the development of generation, transmission and distribution infrastructure, in order to ensure reliability and continuity in the NES, affordability and the constitutional prevalence of the State in electricity generation within the NES.

In addition to general planning objectives, the regulatory framework establishes specific “binding planning criteria” applicable to new generation projects, including:

• contribution to demand coverage and electricity accessibility;
• reliability, continuity, quality and security of the NES;
• sector efficiency;
• energy transition and compliance with clean energy goals;
• State prevalence through the 54% generation threshold;
• energy justice; and
• innovation and technological development.

Failure to comply with these criteria may result in the denial of generation permits. However, the recently issued Migration Guidelines expressly exempt legacy self-supply and cogeneration projects migrating to the new legal regime from compliance with these binding planning criteria, thereby facilitating their transition to the generation and supply schemes recognised under the LSE.

CFE, the CNE and CENACE are required to comply with the planning directives established in PLADESE, and new investments in the sector (including private investments) must also comply with the planning criteria established therein. The granting of permits and the regulatory assessment of business plans for new infrastructure are now tied to the consistency of such projects and the goals and priorities outlined in PLADESE. By contrast, projects migrating pursuant to the Migration Guidelines are assessed under the specific migration procedure established therein, rather than against the general binding planning criteria applicable to new generation projects. SENER may also designate “Strategic Projects” eligible for administrative streamlining mechanisms and prioritised development, particularly for projects involving transmission infrastructure, storage, reliability support or mixed participation schemes with CFE. Thus far, SENER has issued two calls for prioritising permit applications of power generation projects that are deemed to be aligned with SENER’s binding planning criteria.

As mentioned in 1.1 Law Governing the Structure and Ownership of the Power Industry, the Mexican government introduced two major constitutional reforms in 2024, which substantially changed the legal regime of the power sector in Mexico: the reform on strategic industries and areas, and the organisational simplification reform. The Congress also recently passed a new Law for the Promotion of Investment in Strategic Infrastructure for Development of Wellbeing (Mixed Participation Schemes Law), which contemplates additional schemes in which the State and private entities may partner in order to construct and operate electricity facilities.

The approval of the constitutional reforms by Congress gave rise to the enactment of the LSE, LCFE, LPTE and LCNE (among others) in March 2025, followed by the publication of the Regulations to the LSE (RLSE), the Regulations to the LPTE (RLPTE), and other secondary regulations during late 2025 and 2026. As a result, the reform is no longer transitional in nature, but an operative legal framework currently governing the sector. More recently, SENER and the CNE supplemented this framework through the issuance of the Migration Guidelines for Self-Supply and Cogeneration Projects and the Transmission Methodology applicable to legacy projects developed under the former Power Utility Law (LSPEE).

The main foundational changes of the 2024–2025 energy reform on electricity matters are as follows.

• Transformation of the legal nature of CFE (formerly a State-productive company) into a vertically integrated State-public company – this change consolidated CFE’s role across the generation, transmission, distribution and basic supply segments of the electricity value chain, and prioritised reliability, continuity and social function over profitability criteria.
• Clear preference of CFE and other State-owned generation companies over private participants – this includes a mandate to ensure that the State controls at least 54% of the electricity injected into the NES, thereby limiting private sector participation to a maximum of 46%, measured annually under the State prevalence mechanism incorporated into PLADESE.
• New regulatory rules for generation activities, including the formal recognition of self-consumption, cogeneration, storage and mixed participation schemes (long-term production and mixed investment), as well as simplified permitting procedures for certain self-consumption projects and new migration rules for legacy projects.
• Binding planning obligations applicable to new generation projects, requiring compliance with official planning criteria relating to reliability, energy transition, energy justice, system efficiency and State prevalence as a condition for permit issuance. However, legacy self-supply and cogeneration projects migrating under the Migration Guidelines are expressly exempt from these binding planning criteria.
• Creation of the CNE and broader authority of SENER, expanding the federal government’s purview over sector planning, market oversight and regulatory enforcement actions.
• New specific regulations governing electricity storage systems, cogeneration and the voluntary migration of legacy independent power producer permits, self-supply and cogeneration projects, and a new transmission tariff methodology applicable to legacy self-supply and cogeneration projects electing to remain under the LSPEE regime, all of which materially affect the development, operation and economic conditions of generation assets.

In short, these reforms signal a decisive shift toward greater State control, planning centralisation and direct public participation in the Mexican power industry, with significant implications for public and private sector stakeholders alike.

Many of the principal regulations to the LSE and ancillary laws have been issued, including:

• the administrative regulations to each federal statute;
• the new General Administrative Provisions for generation and storage permits, and self-consumption projects; and
• specific regulations governing electricity storage, cogeneration, the voluntary migration of legacy supply and cogeneration projects, the migration of independent power producer (IPP) legacy permits, and the methodology for determining transmission charges applicable to legacy projects remaining under the former LSPEE regime.

These instruments now provide guidance on the new legal and institutional framework for the electricity industry, defining operational, technical and procedural rules governing market participation, permitting and infrastructure development across the sector.

Nevertheless, other administrative instruments continue to require adjustment, implementation or harmonisation. These include the WEM market rules and operating provisions, as well as regulations on storage, distributed generation, inside-the-fence projects, and reinforcement and improvement of the NES.

In addition, the government continues to promote mixed participation schemes between CFE and private investors through PLP and mixed investment structures, supported by the CFE Mixed Development Guidelines and the broader Mixed Participation Schemes Law. These policies are expected to shape the next generation of large-scale generation, transmission, marketing and storage projects in Mexico, particularly where CFE acts as anchor off-taker or equity participant.

Following the issuance of the Migration Guidelines, holders of legacy self-supply and cogeneration projects may now voluntarily migrate to the generation and supply schemes recognised under the LSE through one of six migration modalities applicable to both generation companies and off-takers. The Migration Guidelines also exempt migrating projects from the binding planning criteria otherwise applicable to new generation projects, while the accompanying Transmission Methodology establishes a new transmission tariff applicable to legacy projects electing to remain under the former legal regime, thereby creating a significant economic incentive to migrate.

Further regulatory attention is nevertheless expected in relation to Clean Energy Certificates (CELs), long-term reliability contracts for storage systems, distributed generation, and the remaining Market Rules and operating provisions necessary to complete the implementation of the LSE.

Together, these regulatory developments will shape the evolving landscape of the Mexican power sector and confirm how public and private stakeholders can operate pursuant to the principles already enacted under the new regime.

Government business plans and public presentations have shown that private investment in power infrastructure remains critical to meet the country’s increasing demand. This is underscored by the country’s strategic position as a nearshoring investment destination, which continues to drive industrial growth, data centre development and manufacturing expansion, all of which require significant incremental electricity consumption and grid reliability.

The government has announced a significant investment strategy for the power sector through 2030, combining public, mixed and private participation. Under the National Electric System Strengthening and Expansion Plan (2025–2030), CFE is expected to invest to increase generation capacity through the addition of 22,674 MW, while private-sector participation is expected to contribute at least 6,400 MW, primarily from clean energy and renewable projects. In parallel, the government has announced a broader portfolio of mixed and private investment projects, with the objective of incorporating up to 32 GW of additional generation capacity by 2030, including renewable generation and storage systems developed either independently or in partnership with CFE. Transmission and distribution investments remain equally critical, including reinforcement of the National Transmission Grid and expansion of distribution infrastructure to support reliability, industrial growth and nearshoring demand.

Much of the private-sector participation is expected to occur through mixed participation schemes with CFE, including PLP, mixed investment projects, renewable generation paired with storage, and reliability-linked infrastructure projects, rather than through the fully liberalised market structures that characterised the post-2013 regime. Recent government policy has also prioritised projects capable of entering commercial operation from 2027 onward, alongside simplified self-consumption permitting and storage integration mechanisms, as well as the voluntary migration of legacy self-supply and cogeneration projects to the schemes recognised under the LSE, reinforcing a model in which private investment is encouraged, but within a centrally planned framework led by CFE and SENER.

In the current political environment, with President Sheinbaum’s political party and allies controlling the qualifying majority of the vote of Congress, the principles introduced by the energy reform of 2024 are expected to remain stable for the foreseeable future. This continuity should provide a measure of legal certainty for private investors operating under the new regulatory and market rules, although investment decisions are now more closely tied to planning compliance and strategic alignment with public policy priorities. For holders of legacy self-supply and cogeneration projects, the recent Migration Guidelines and the accompanying Transmission Methodology have also introduced important economic and regulatory considerations, particularly in light of the new transmission tariff applicable to projects electing to remain under the former legal regime.

Note, however, that the procurement of energy and ancillary products by CFE (as the main supplier) no longer includes the obligation to perform long-term auctions. Therefore, long-term Power Purchase Agreements (PPAs) awarded in such tenders, which historically anchored large-scale clean energy generation facilities, are no longer part of CFE’s primary investment strategy. Instead, CFE’s current strategy prioritises mixed development schemes, self-consumption projects, storage integration and bilateral structures aligned with system reliability and State prevalence objectives.

Another unique feature of the current framework is that private participation is no longer assessed solely under market efficiency principles, but also through constitutional concepts such as energy justice, State prevalence and binding planning. As a result, project bankability increasingly depends not only on commercial viability, but also on regulatory alignment with SENER’s planning criteria and CFE’s strategic priorities. Notably, however, legacy self-supply and cogeneration projects electing to migrate under the Migration Guidelines are expressly exempt from the binding planning criteria otherwise applicable to new generation projects, thereby facilitating their transition to the current legal framework.

The energy reform of 2013 established the operation of the WEM, designed to promote competition and efficient electricity trading. While the 2024 constitution did not eliminate the WEM, its operation has materially changed as a result of CFE participating as the constitutionally authorised State-preferred market participant, with priority over private market participants and a central role in preserving the State’s 54% prevalence in electricity injection to the NES.

The WEM, operated by CENACE, considers the following transactions:

• electricity (short-term spot markets);
• capacity;
• associated products, such as CELs; and
• ancillary services (eg, operating reserves, frequency regulation, emergency start and voltage regulation).

Electricity prices in the WEM are determined based on local marginal prices, which factor in the cost of energy, technical losses and transmission congestion. For such purpose, the government has implemented a “Load Economic Dispatch” model, which adds operational, safety and reliability considerations to dispatch decisions and alters the criteria for energy injections to the NES and the local marginal price calculations for the short-term spot market. This mechanism replaces the previous dispatch approach based primarily on lowest variable cost generation, and reduces the preferential dispatch effect historically enjoyed by intermittent renewable sources.

The “54%– 46%” electricity injection rule may also influence the determination of energy dispatch and prices, since this requirement operates over energy delivered to the NES during a relevant year. Therefore, dispatch order and generation planning may be adjusted where the Load Economic Dispatch affects the proportion of energy delivered in order to preserve the mandated energy mix balance and ensure compliance with the State prevalence principle incorporated into PLADESE. However, projects migrating under the Migration Guidelines are expressly exempt from the binding planning criteria otherwise applicable to new generation projects, facilitating their incorporation into the current market framework.

CENACE also operates an annual Balancing Capacity Market, in which Load Serving Entities (suppliers) must procure capacity through transactions with generators to cover the consumption of the loads they represent during the “100 critical hours” of the NES – ie, the most stressed periods of the year for generation reserves. In addition, the current framework contemplates the use of long-term reliability contracts for electricity storage systems, particularly where storage assets support system reliability and reserve obligations.

The Rules of the WEM also consider the operation of the CELs market, which requires Load Serving Entities to credit CELs (which evidence production from clean sources) before the CNE in proportion to the electricity consumed by their loads (currently at 13.9%). Generators can earn one CEL per MWh of power output stemming from clean sources. Self-consumption projects may also be eligible to receive CELs under the updated regulatory framework, while associated load centres remain subject to clean energy compliance obligations.

To hedge against potential price volatility, market participants may enter into Electric Hedging Agreements (EHAs) for energy products. Those EHAs may also consider bilateral financial transactions in order to assign the receivables or accounts payable from WEM operations. However, unlike the previous market model, long-term auctions are no longer mandatory for CFE procurement, and bilateral structures, mixed participation schemes and self-consumption arrangements have become increasingly relevant alternatives for long-term offtake.

CFE’s regulated services (including basic supply, transmission and distribution) continue to be subject to regulated rates, determined annually by the CNE under the rules established in the previous regime.

High-load consumers are still eligible to act as “qualified users” – a status that allows off-takers to receive electricity supply from “qualified suppliers” (public or private) under free-market conditions. Qualified suppliers must meet rigorous compliance, reporting and risk management requirements before CENACE, including posting financial guarantees and minimum hedging obligations.

In some cases, major consumers may also register as market participants and transact directly in the WEM, including executing EHAs with generation companies to optimise procurement strategies and manage risk exposure. This remains particularly relevant for industrial users associated with nearshoring projects, manufacturing hubs and data centre developments, where supply reliability and long-term energy price visibility are critical commercial considerations.

Cross-border transactions of electricity are permitted under the LSE, subject to prior authorisation from SENER for imports and exports of power. Such authorisations are assessed not only from a commercial standpoint, but also considering reliability, system security, binding planning criteria and consistency with the strategic objectives of the NES.

The NES currently has seven interconnection ties for cross-border transactions, with three neighbouring countries:

• one with Belize;
• one with Guatemala; and
• five with the US (three connecting with Texas and two with California).

Market rules allow cross-border transactions for commercial purposes and for emergency or reliability support. Notably, export and import activities are not subject to capacity reservation requirements (except for reliability/emergency transactions, which are given certain preference), so each foreign trade transaction is scheduled and confirmed based on market rules.

In addition, power plants located abroad but exclusively interconnected to the NES may inject power output to the grid based on certain specific rules applicable to interconnection and dispatch.

The NES is heavily reliant on combined-cycle power plants (predominantly controlled by the Mexican State), representing the largest share of electricity injected to the grid. The rest of the generation mix is composed primarily of thermal, hydroelectric, wind, solar, nuclear, coal and other technologies, including cogeneration, geothermal, turbogas, storage-linked facilities and distributed generation.

The precise composition of the supply mix continues to evolve as a result of new combined-cycle additions by CFE, the gradual incorporation of renewable generation projects, storage systems and self-consumption projects, as well as the operational effects of the State prevalence requirement introduced by the 2024 reform. In particular, hydroelectric rehabilitation projects and new gas-fired generation remain central to CFE’s expansion strategy, while solar, wind and storage projects continue to be the principal areas of private-sector participation.

This composition reflects a generation mix still dominated by fossil fuels, albeit complemented by a growing share of renewable and alternative energy technologies. The relative dominance of State-owned generation assets – particularly in combined-cycle and hydroelectric and strategic mixed participation projects – underscores the strategic role of the public sector in shaping energy supply, bolstered by the changes implemented in the 2024 reform and the annual measurement of the 54% State prevalence principle.

The reform of 2024 and the LSE formalise the predominance of State-owned assets over private projects in both the generation and marketing of electricity.

On the generation side, this principle is implemented through a mandatory quota, requiring at least 54% of the electricity injected into the NES on an annual basis to originate from State-controlled generation. Under the current regulatory framework, this figure is understood to encompass not only electricity generated and delivered directly by CFE (or MIP), but also production from joint ventures or public-private projects in which CFE holds equity or operational involvement.

The annual measurement of this quota is incorporated into PLADESE and influences dispatch decisions, permitting and generation planning. Although the legal framework does not establish an automatic sanction if private generation exceeds the 46% threshold in a given year, the “Load Economic Dispatch” model and binding planning criteria operate as practical tools to preserve the required balance and prioritise State prevalence over time.

From an economic competition perspective, rules on market concentration may also apply, pursuant to the LSE and LFCE (although CFE retains constitutional preference and a special legal status as the State public company responsible for strategic electricity activities).

Market concentration is not deemed an anti-competitive behaviour in and of itself (per se), unless it results in harm to the competitive process from an economic agent with substantial market power engaging in exclusionary conduct. This remains particularly relevant for qualified supply activities, fuel-linked generation portfolios, and acquisitions involving strategic infrastructure adjacent to transmission or storage operations.

As outlined in 1.4 Sale of Power Industry Assets, the Mexican antitrust framework is undergoing significant structural changes due to the removal of COFECE and the creation of a new public entity under the Ministry of Economy, the CNA, which now has authority on economic competition matters. The CNA has assumed full jurisdiction and authority over all economic competition procedures and investigations (overseeing all markets, including the electricity sector); combined with the new legal framework, this will result in changes to:

• investigations into monopolistic practices;
• market dominance assessments;
• pre-merger control thresholds and procedures; and
• the imposition of sanctions.

In addition, mixed participation projects involving CFE may be reviewed not only from a competition standpoint, but also from a strategic planning and public policy perspective, particularly where such projects are designated as priority projects under PLADESE or involve CFE equity participation in generation assets.

Following the constitutional reform and the institutional restructuring of the Mexican competition regime, the CNA is the federal agency tasked with monitoring the Mexican power market on antitrust matters, particularly with respect to private economic agents.

The LFCE classifies punishable exclusionary conducts in two categories:

• absolute monopolistic practices, (including price fixing, bid rigging and unlawful exchanges of information); and
• relative monopolistic practices, which are performed by economic agents with substantial market power, aiming to affect the competitive process.

In the electricity sector, antitrust scrutiny remains particularly relevant for qualified supply activities, co-ordinated conduct among generators or suppliers, fuel-linked vertical arrangements, and strategic transactions involving generation portfolios, storage systems or qualified-user supply structures. The existence of CFE’s constitutional preference does not eliminate scrutiny over private participants, particularly where exclusionary practices affect access to the WEM or qualified supply conditions.

The enforcement of anti-competitive rules usually involves formal investigations, an administrative adverse procedure (in the form of a trial) and the imposition of substantial economic fines, potentially amounting to as much as 10% of the annual revenue of the economic agent. In addition, certain absolute monopolistic practices may result in criminal liability for the individuals involved, and pre-merger transactions completed without prior clearance may be subject to nullity, unwinding orders and/or administrative sanctions.

The construction and operation of generation facilities are governed mainly by the LSE and the General Law of Environmental Protection and Ecological Equilibrium (LGEEPA).

The LSE and regulations stemming therefrom – such as the RLSE, the WEM Rules, operating provisions and CNE-issued regulations on generation and storage permits – specifically regulate the development and operation of generation facilities, and address their social impacts (whether for small, medium or large-scale operations). In addition, all new projects participating in the NES must comply with the binding planning criteria issued by SENER, and their consistency with PLADESE may directly affect permit issuance.

The LSE currently provides three distinct regulatory types for power generation, as follows.

• Distributed generation: projects with a capacity of up to 0.7 MW, which do not require a generation permit from the CNE (irrespective of other interconnection agreements with CFE).
• Self-consumption: generation for the “self needs” of users belonging to the same corporate group, whether or not they are connected to the NES (for back-up purposes). In addition, interconnected self-consumption projects between 0.7 MW and 20 MW are subject to a simplified permitting procedure before the CNE, while isolated self-consumption facilities may benefit from certain regulatory exemptions, including in some cases the exemption from filing a Social Impact Assessment (MISSE). Surplus energy in interconnected self-consumption projects may only be sold to CFE.
• Generation for the WEM: this includes participation of the State and private parties, either individually or through public-private (mixed) vehicles. For the latter, two types of public-private participation modalities are provided: long-term production (energy is sold exclusively to CFE) or mixed investment (CFE may participate directly or indirectly through equity participation, in-kind contributions or strategic control mechanisms, without a strict statutory equity threshold at project level, provided the overall State prevalence principle is preserved).

In addition, storage facilities associated with a power plant or those “isolated” – ie, operating independently to a load point or power plant – are considered generation assets and, therefore, require a permit from the CNE. The new storage regulations distinguish multiple storage modalities, including standalone storage, storage associated with power plants, storage linked to load centres and storage supporting transmission and distribution activities. Not all storage assets require a permit, particularly where they are ancillary to existing facilities and do not participate independently in the WEM.

From an environmental standpoint, the LGEEPA governs the requirements of the projects, including their environmental impact assessments and authorisations. Other federal laws may apply, depending on the specifications of the generation projects, such as those related to waste management, forestry land use and water resources. Local (state and municipal) environmental and zoning regulations may also be relevant and must be considered.

Key project agreements – including Development Agreements, EPC, O&M, financing agreements, PPAs and EHAs – are subject to commercial and civil contract laws, which generally support freedom of contract and a choice of law doctrine. However, mixed participation schemes involving CFE may also require compliance with specific public-sector procurement rules, CFE internal approval processes and the guidelines applicable to long-term production and mixed investment structures with CFE.

Generation facilities are subject to several regulatory requirements at the federal, state and municipal levels. The main governmental authorisations for the construction and operation of power generation facilities include the following.

• Generation permit: facilities exceeding 0.7 MW of capacity require a generation permit granted by the CNE, the application for which requires the submission of comprehensive technical, financial and legal documentation and information of the project, shareholder disclosure, audited financial statements, financing structure, internal rate of return projections, construction schedules and the corresponding CENACE impact study. The LSE now mandates that generation permits align with PLADESE, so permit applications for projects falling outside the scope of such plan may be denied. The process to obtain such permit currently takes from six to 12 months, although in practice the timeline may change depending on technical studies, requests for additional information and interconnection complexity. Interconnected self-consumption projects between 0.7 MW and 20 MW are subject to a simplified permitting process.
• Interconnection agreement: although the grids of the NES are owned by CFE, CENACE oversees grid operation and interconnection procedures. Any interested party seeking to interconnect its generation facilities to the NES must follow a phased technical process administered by CENACE to determine the necessary grid reinforcement and interconnection requirements. The second stage of this process includes the formal impact study issued by CENACE, which is a mandatory requirement for the generation permit itself. Once the technical studies are concluded, CENACE directs CFE to execute the relevant interconnection agreement with the generation permit holder.
• Market participant agreement: during the operational phase of the project, generation assets are required to execute a market participant agreement with CENACE to represent those assets in the WEM. Financial guarantees shall be posted in order to perform sales of energy products in the WEM.
• Environmental Impact Authorisation: the construction and operation of power generation facilities require a federal environmental authorisation from the Ministry of the Environment and Natural Resources (SEMARNAT), which evaluates the environmental, safety and health aspects of the project.
• Social Impact Authorisation (MISSE): generation facilities are also required to obtain clearance from SENER on the social impacts of the project. Filing this application is necessary to obtain a generation permit, while the operation of the project depends on securing the relevant social impact authorisation. Certain isolated self-consumption projects may be exempt from this requirement under current regulations.
• Change of forestry land use: if the project affects protected flora, an authorisation must be obtained from SEMARNAT for the relocation of such species.
• Archaeological clearance: in specific regions, developers must secure archaeological clearance before commencing construction.
• Water concession: the use of national waters may require permits or concessions from the National Waters Commission (however, hydroelectric plants of 30 MW capacity may be exempted from water permitting requirements).
• Local authorisations: construction permits, land use approvals and civil protection authorisations, governed by local regulations, must also be secured prior to construction and operation.

In addition, if the project site is located on lands inhabited or claimed by indigenous communities, SENER is obliged to conduct a prior consultation process to ensure the protection of indigenous rights. Projects designated as “Strategic Projects” under PLADESE may also benefit from administrative streamlining mechanisms intended to accelerate permitting and execution, particularly where they involve transmission infrastructure, reliability support or mixed participation schemes with CFE.

Government-issued authorisations for the construction and operation of generation facilities typically include strict deadlines for meeting key project milestones, such as the start of construction, provisional acceptance (ready for testing) and the commencement of commercial operations. Failure to meet these milestones may trigger administrative procedures to amend relevant permits; otherwise, the effectiveness of the permit may be at risk.

Material changes to projects (such as changes to nameplate capacity, generation technology or site conditions) generally require a formal amendment to the main permits in order to properly reflect the project scope. The amendment process often mirrors the original permitting procedure in both substance and timing, although for minor changes the administrative process only requires an “update” rather than a full permit amendment. Under the new CNE permit regulations, certain amendments are expressly restricted or prohibited, particularly where they involve relocation of the power plant by municipality or node, changes of technology, capacity increases for legacy permits, or changes of modality affecting legacy generation projects.

Legacy permits granted under the former Electricity Industry Law or the Public Power Utility Electricity Law are also subject to specific migration procedures if the permit holder intends to move into the new modalities created under the LSE, including self-consumption, cogeneration or generation for the WEM. These migration procedures require separate regulatory review and may have effects regarding prior interconnection rights, operational obligations and permit validity.

Interconnection agreements also impose firm deadlines for the works covered thereunder, coupled with the posting of financial guarantees to ensure their timely completion. They are also subject to hard deadlines and the posting of collateral to guarantee their completion in time.

In contrast, environmental and social authorisations focus on terms and conditions to monitor the commitments assumed by the generation company. These include environmental mitigation measures, community engagement obligations, biodiversity protection requirements and compliance with social impact commitments throughout the operational life of the project. Note that the Mexican President recently released a draft of a new LGEEPA which – if approved – may affect the environmental aspects of power generation projects.

The LSE recognises the power sector as a matter of public interest and national policy. However, eminent domain for land use and occupation is limited to hydroelectric and geothermal power plants only.

Land use and occupation for hydroelectric and geothermal power plants follow a predetermined process established in the LSE for both private and agrarian land. This process includes mandatory filings and requirements for compensation and payments based on the value of the land.

The LSE also identifies types of real estate rights available for generation projects, including private ownership, lease, easements and usufruct rights.

PLADESE includes a dedicated section on the decommissioning of generation facilities. Given the binding nature of PLADESE, decommissioning must proceed in accordance with the requirements provided thereunder, including consistency with system reliability, capacity planning and infrastructure replacement needs.

Generators are also required to notify CENACE of the decommissioning of the generation assets within one year prior to the effective decommissioning date. Importantly, decommissioning is not permitted for power stations still participating in capacity transactions with binding obligations.

CENACE will assess whether the facility plays a role in system reliability. If it does, CENACE notifies the CNE to obtain approval to perform a capacity auction, in which the generator is obliged to participate.

Environmental authorities may also impose requirements for insurance or financial guarantees to ensure that decommissioning activities comply with the conditions imposed on site remediation, including waste management. Such obligations may include the dismantling of infrastructure, the restoration of affected land, the handling of hazardous materials and long-term environmental monitoring. SENER may also determine specific social commitments upon decommissioning, particularly in projects located in sensitive or community-affected areas.

The construction and operation of transmission lines is governed by the LSE, the LPTE and the LGEEPA. These statutes also regulate associated facilities, such as energy storage equipment associated with transmission activities, particularly where storage systems support reliability, congestion management or reserve capacity obligations within the NES.

Transmission services are exclusively reserved to the Mexican State, through CFE. CFE must comply with the General Administrative Provisions on open access and terms of service for transmission and distribution services, as approved by the CNE, and also with the binding planning directives issued by SENER under PLADESE.

Nevertheless, the LSE and LCFE allow private sector involvement in the construction, installation, financing and improvement of the National Transmission Grid (NTG). In particular, the LCFE provides that CFE may create joint ventures with private entities for the development of the NTG, and the RLSE expressly recognise mixed participation schemes for strategic infrastructure projects where CFE retains control and transmission services remain under State ownership. These structures have become increasingly relevant as the government prioritises grid reinforcement to support nearshoring demand, renewable integration and storage deployment.

Private market participants, including generators, exporters, importers and consumers, are allowed to construct and operate private lines for specific uses, such as onsite delivery, interconnection and connection to the grid. These private lines are not considered part of the NTG and are therefore not subject to open access rules. However, the provision of transmission services to third parties via such lines is expressly prohibited, and such infrastructure must remain limited to private use, self-consumption schemes or project-specific operational needs.

PLADESE sets forth the government’s policy for the expansion and improvement of the NTG, including strategic transmission projects, regional reinforcement priorities and the integration of new generation and storage assets into the system. SENER may designate certain transmission projects as “Strategic Projects”, allowing administrative streamlining and prioritised development, particularly where they are critical for system reliability, industrial growth corridors or mixed participation projects involving CFE.

As the exclusive provider of transmission services, CFE is not required to obtain a specific permit for such activities. However, transmission must comply with the General Administrative Provisions on open access and terms of service for the provision of such services issued by the CNE.

Notwithstanding the exemption from sector-specific permitting, the construction and operation of transmission lines requires environmental, social, local and municipal authorisations (similar to those applicable to generation facilities), as well as government approvals for crossroads, lands and water bodies within the jurisdiction of governmental agencies. These approvals are typically contingent on the acquisition of the corresponding real estate rights.

Note that environmental impact authorisations are not required for transmission infrastructure located in urban, rural, industrial or touristic areas.

Environmental and social authorisations related to the construction and operation of transmission infrastructure include provisions for remediation measures, ongoing monitoring protocols and obligations tied to eventual decommissioning.

Transmission services are deemed to be a public utility and are therefore subject to expropriation under that designation. The LSE expressly grants eminent domain rights for the construction and operation of transmission works.

CFE must follow the land use and occupation procedures outlined by the LSE in order to obtain the necessary real estate rights for the development, construction and operation of transmission infrastructure. These procedures consider the execution and ratification of real estate agreements before civil or agrarian courts, as well as specific compensation concepts.

CFE is the only entity allowed to provide public utility transmission services. The terms and conditions governing these services (including rates) are approved by the CNE (whose rules were grandfathered from the former regulator).

While CFE holds exclusive rights to operate transmission services, private investment in transmission infrastructure is expressly contemplated, either under contractor modality or through partnerships with CFE, including mixed participation schemes, financing arrangements and strategic infrastructure development vehicles where ownership and operation remain under State control. In support of this, the Mexican government announced investments of up to USD6.5 billion for the 2025–2030 period, aimed at 158 transmission projects that would reinforce the NTG with 15,729 MVA of capacity. These projects are closely linked to industrial growth corridors, renewable generation integration, storage deployment and the reinforcement of supply reliability for nearshoring-related demand.

Under the current framework, transmission expansion is directly tied to PLADESE and the binding planning criteria issued by SENER. As a result, private participation in transmission projects is no longer driven solely by economic opportunity, but also by strategic alignment with national planning priorities and CFE’s infrastructure development programme.

Transmission rates are issued and approved annually by the CNE. These rates are calculated using methodologies that ensure a reasonable return of investment and cost recovery on the operation, maintenance, financing, investment, improvement, expansion and depreciation of the NTG, and also accounting for both technical and non-technical losses. In addition, the CNE recently issued a specific Methodology for Determining the Charge for the Electricity Transmission Service, applicable to holders of self-supply and cogeneration permits granted under the former LSPEE, replacing the historical wheeling regime applicable to such legacy projects.

Market participants pay for transmission services through CENACE, which incorporates these rates into the settlement processes of the WEM. Basic supply rates also consider specific transmission costs, reflected as part of the variable energy charges. Under the new Transmission Methodology, legacy self-supply and cogeneration projects electing to remain under the LSPEE regime will become subject to the revised transmission tariff as of October 2026. By contrast, projects that elect to migrate under the Migration Guidelines may preserve the transmission regime currently applicable during the migration process, subject to meeting the applicable statutory deadlines.

The CNE is also empowered to issue general terms of service for transmission services, outlining the scope and types of service offered, credit terms, conditions for service suspension, penalties and compensation mechanisms, and procedures for addressing complaints from users.

Open access to the NES is recognised as universal and a public utility service obligation, provided that it is technically feasible and does not compromise the reliability of the system. CENACE is mandated to ensure that open access obligations are met while safeguarding the operational reliability of the NES.

The legal, financial and technical requirements to allow the interconnection of generation facilities and the connection of load points are established in the Market Rules, which include a dedicated Manual detailing the procedures. The interconnection and connection processes involve several technical studies to identify reinforcement works (which are incorporated in the relevant interconnection or connection agreements), including indicative, system impact and facility studies.

Subject to completion of the relevant studies, CFE is obliged to allow the interconnection and connection of power stations and loads on a non-discriminatory basis. In this regard, CENACE instructs CFE to enter into the agreement with the interested party. However, available interconnection capacity, reinforcement obligations and compliance with planning priorities may materially affect project timing and economic viability, particularly for large-scale generation and storage projects.

Upon completion of the required infrastructure, verification units certify that the interconnection facilities comply with the technical specifications established in the agreements. Interconnection or connection works may be executed directly and financed by the interested party or integrated into the expansion and improvement works outlined in PLADESE.

Distribution services are exclusively reserved to CFE, pursuant to the Mexican Constitution and the LSE.

The operation of General Distribution Grids (GDGs) is governed by the LSE and the General Administrative Provisions on open access and terms of service for distribution services, as approved by the CNE.

As with transmission services, CFE is not required to obtain a specific permit to provide distribution services.

However, the construction and operation of distribution facilities require environmental, social, local and municipal authorisations (similar to those applicable to generation facilities), as well as government approvals for crossroads, lands and water bodies within the jurisdiction of governmental agencies. These approvals are typically contingent on the acquisition of the corresponding real estate rights.

Note that environmental impact authorisations are not required for distribution substations located in urban, rural, industrial or touristic areas.

Environmental and social authorisations related to the construction and operation of distribution infrastructure include provisions for remediation measures, ongoing monitoring protocols and obligations tied to eventual decommissioning.

Distribution services are deemed to be a public utility and are therefore subject to expropriation under that designation. The LSE expressly grants eminent domain rights for the construction and operation of distribution works.

CFE must follow the land use and occupation procedures outlined by the LSE in order to obtain the necessary real estate rights for the development, construction and operation of distribution infrastructure. These procedures consider the execution and ratification of real estate agreements before civil or agrarian courts, as well as specific compensation concepts.

CFE is the only entity allowed to provide public utility distribution services. The terms and conditions governing these services (including rates) are approved by the CNE (whose rules were grandfathered from the former regulator).

While CFE holds exclusive rights to operate distribution services, the participation of private investment in distribution infrastructure is expected, under contractor modality. In support of this, the Mexican government announced investments of up to USD3.79 billion for the 2025–2030 period, aimed at 97 brand new substations, 95 expansion projects for existing substations, 6,875 modernisation works and 42,221 electrification works. These projects are intended to strengthen supply reliability, support industrial growth corridors, improve service quality and expand electricity access in under-served regions as part of the broader energy justice policy introduced by the 2024 reform.

Distribution rates are issued and approved annually by the CNE. These rates are calculated using methodologies that ensure a reasonable return of investment and cost recovery on the operation, maintenance, financing, investment, improvement, expansion and depreciation of the GDGs, and also accounting for both technical and non-technical losses.

Market participants pay for transmission services through CENACE, which incorporates these rates into the settlement processes of the WEM. Basic supply rates also consider specific distribution costs, reflected as part of the fixed capacity charges.

The CNE is also empowered to issue general terms of service for distribution services, outlining the scope and types of service offered, credit terms, conditions for service suspension, penalties and compensation mechanisms, and procedures for addressing complaints from users.