Mexico Issues New Electricity Sector Rules

Mexico’s government has published detailed regulatory provisions for the implementation of the Regulation of the Electric Sector Law, setting new boundaries for electricity generation, self-consumption, and public-private development under the restructured 2025 framework.

The regulation, formally titled Reglamento de la Ley del Sector Eléctrico, lays out the operational and legal criteria that will govern how energy is produced, sold, and consumed across the country. It introduces detailed rules for distributed generation, defines the rights and obligations of self-consumption users, and establishes formal schemes for mixed development projects combining state and private participation.

Distributed Generation and Self-Consumption Rules

The regulation’s Title III on electricity generation begins by reaffirming the role of distributed generation (DG) as a key element for grid resilience and sustainability. Art. 47 specifies that DG capacity refers to installed capacity, which will be defined in detail through administrative provisions issued by the Ministry of Energy and the National Energy Commission (CNE).

DG and exempt generation facilities must comply with national technical standards for accessibility, quality, reliability, continuity, efficiency, safety, and sustainability, explicitly recognizing DG as a mechanism that promotes energy justice by expanding access to clean and locally produced electricity.

Art. 49 outlines how DG plants may sell electricity and associated products, requiring compliance with official contract models and compensation formulas. These terms will be updated periodically by the authorities to reflect market conditions and technical parameters.

The next section, self-consumption, defines the legal and operational conditions for users who produce energy primarily for their own use. Art. 50 distinguishes between isolated self-consumption systems, those not connected to the grid, and interconnected ones, which may rely on the national transmission or distribution network for backup or partial supply.

All self-consumption systems must hold a generation permit and comply with forthcoming rules from CNE. They must also report the energy demand they serve “on site,” whether for an individual user or for multiple users grouped under a shared self-consumption arrangement.

Art. 52 requires that each permit list all associated users and their points of supply, and that these be registered and updated annually. The rule introduces transparency in identifying who benefits from self-generation and under what contractual structure.

Isolated and Interconnected Self-Consumption

Art. 53–56 describe the isolated self-consumption regime, under which generation systems operate independently from the national grid. Projects under 20MW are exempt from submitting a social impact declaration, easing the process for industrial or community-scale facilities.

Holders of isolated self-consumption permits may later choose to connect to the grid, provided they meet technical and regulatory requirements. However, any interconnection must be cleared to prevent unauthorized injection of energy into the network.

If isolated users require backup electricity, they may request transmission or distribution service from the grid operator. The regulation stresses that this connection may not be used for selling power but solely for maintaining continuity of supply.

Interconnected self-consumption, regulated by Art. 57–61, allows plants to operate in combination with the national system. It introduces specific technical obligations to prevent unauthorized injection and requires simplified permits for facilities between 0.7MW and 20MW.

Storage is explicitly recognized as part of self-consumption systems, whether as an emergency backup or to support ramping needs, but must comply with detailed parameters that CNE will define. Importantly, the regulation forbids users from selling surplus power except in limited cases permitted under the law.

Generation for the Wholesale Electricity Market

The third chapter of Title III governs generation for the Wholesale Electricity Market (WEM). Art. 62–67 reaffirm that both public and private entities may develop generation projects, but only if these align with the national planning instruments and system operation needs.

All new projects must undergo technical interconnection studies and obtain social impact approval before construction. The National Center for Energy Control (CENACE) retains authority over operational dispatch and reliability criteria.

In cases of emergency, CENACE may require all generation and storage assets to supply energy to the grid to safeguard national reliability. The regulation prioritizes basic service supply, electricity for residential and small-user segments, and allows CFE to acquire capacity through coverage contracts.

Private projects must align with published grid capacity limits and system plans before advancing to the execution phase, establishing clear sequencing between planning and investment.

Mixed Development Schemes: State-Private Cooperation

Chapter IV introduces a new category of “schemes for mixed development”, structures that formalize collaboration between the state and private sector for building, financing, and operating generation infrastructure.

According to Art. 68, all mixed-development projects must adhere to the same guiding principles as the broader electric sector: accessibility, quality, reliability, continuity, efficiency, safety, and sustainability. Projects must also conform to national energy planning instruments and demonstrate consistency with the needs of the National Electric System.

Under Art. 69, these schemes may encompass the main generation facility, its associated infrastructure, auxiliary works, and energy storage systems, including all necessary “associated products” that contribute to grid stability.

Art. 70 establishes that any state company participating in such projects must secure approval from its board of directors. The board’s evaluation must include the selection criteria for private partners, the legal or financial vehicle to be used, a full financial and economic analysis, and confirmation that the project aligns with national planning priorities.

The board must also ensure that the project meets technical and financial standards that guarantee the “best possible conditions for the State.”

Once a project is approved, Art. 71 requires that the state entity conduct the private-partner selection process under principles of transparency, efficiency, accountability, and timeliness. The corresponding guidelines must be published in the Official Gazette for public visibility.

Private participants must be legally constituted under Mexican law and have a registered domicile in the country. Projects must be developed for a fixed term, no longer than 30 years, and structured to allow full recovery of investments within that period.

Art. 74 allows the creation of dedicated legal or financial instruments, such as special-purpose vehicles or trusts, to manage mixed-development projects. These instruments must specify conditions for operation, maintenance, technological updates, and eventual asset transfer at the end of the project’s term.

Contracts must also include clauses for dispute resolution, exit terms, and the transfer of assets, which remains optional and preferential for the State.

Article 75 concludes that all mixed-development projects must ensure optimal economic, technical, financial, and operational outcomes for the national electric system.

Long-term production

Within the mixed-development framework, Section II defines long-term production, a model in which private companies build, finance, operate, and maintain generation plants to sell electricity exclusively to the State or its subsidiaries.

Under this scheme, CFE does not invest directly in the project but commits to purchase the output once the plant begins commercial operation. The arrangement resembles a long-term power purchase contract between private developers and the public utility.

Art. 76 establishes that long-term production plants cannot hold other generation permits, sell to third parties, or participate in other market modalities. They must be represented in the wholesale market by the State enterprise.

Art. 77–79 define the financial and contractual structure: the private party assumes development and operational risk, while the State makes regular payments for delivered energy and associated products. Asset transfer at the end of the contract term is optional and at no cost, subject to agreed technical conditions. Contracts must ensure the best economic outcome for the State, with detailed provisions covering installed capacity, payment formulas, operational standards, and penalties for non-availability or delay. Payments for capacity must remain uniform and non-increasing over time.

Art. 83 further introduces a monthly adjustment mechanism tied to the availability factor of each plant: full payment if performance meets expectations, increased payment for exceeding targets, or reduced payment when performance falls below contractual thresholds.

Mixed Investment

Section III defines mixed investment projects as joint ventures between the State and private entities to build and operate generation facilities. These differ from long-term production schemes in that the State contributes capital or assets and retains majority ownership.

Art. 85 mandates that the State must hold at least 54% of the common capital, or its equivalent, within 180 business days after commercial operation begins. The State’s participation can be direct, through the parent company, or indirect via subsidiaries, trusts, or special-purpose vehicles.

Art. 86 distinguishes two forms of participation: contribution and association. In a contribution, the State provides capital, property rights, permits, or other tangible or intangible assets. In an association, it partners directly with private entities under mutually defined rights and obligations. Projects may be structured through trusts, joint ventures, commercial companies, or other legal vehicles that guarantee optimal conditions for the State and the national grid. Assets and rights associated with mixed-investment projects may be used as collateral to secure financing, as long as this aligns with applicable law and the project’s governing vehicle.

Art. 87 requires that these vehicles include mechanisms for project evaluation, performance monitoring, and eventual asset disposition once the contract concludes.

Finally, Art. 88 opens the door for “other mixed-development schemes,” which the ministry may regulate through general administrative provisions if necessary to enhance sector performance or align with the law’s core principles.

Cogeneration

Chapter V of the regulation defines cogeneration as the simultaneous production of electricity and useful heat from a single energy source to increase efficiency and reduce fuel use and emissions. Cogeneration may operate under the frameworks of distributed generation, self-consumption, or wholesale market generation.

Art. 90 clarifies that cogeneration for self-consumption may involve selling electricity within a private network, provided it does not constitute sale to external third parties. The capacity for cogeneration permits corresponds to the level approved by the CNE under forthcoming administrative provisions, which will also define efficiency standards and reporting requirements.

The regulation further mandates that wholesale cogeneration plants must follow mandatory dispatch rules set by the market regulations, while self-consumption cogeneration must comply with reliability criteria issued by CENACE.

Microgrids and Small Systems

A notable addition in the new framework is the formal recognition of microgrids and small electricity systems as legitimate components of Mexico’s power architecture. Art. 164 to 176 define small systems as those with a demand between 5MW and 100MW not permanently connected to the national grid, while microgrids are systems below 5MW that serve a defined local area and can operate autonomously.

Microgrids may rely on solar, wind, or hybrid sources, and their regulation seeks to promote community participation, local governance, and energy justice. The law allows microgrids to function as single legal entities capable of selling electricity within their boundaries, while those under 0.7MW are exempt from generation permits.

These provisions are expected to facilitate energy access in remote regions and support industrial or community-led energy projects, expanding decentralized generation and reinforcing the resilience of the National Electric System.

Energy Storage Integration

Another major update comes in Title VI, which formally integrates energy storage systems into Mexico’s power regulation. Art. 192 to 195 define how storage can participate jointly in generation and commercialization activities, or be embedded as part of the public transmission and distribution infrastructure operated by the CFE.

Energy storage projects will require permits from CNE if their capacity exceeds 0.7MW and are not directly associated with a generation or consumption facility. Storage assets integrated into CFE’s infrastructure are considered part of public service operations and cannot participate in the wholesale electricity market.

The rules also empower CENACE to contract storage services that enhance grid reliability, efficiency, or renewable integration, acknowledging storage as a strategic tool for the energy transition. In case of emergencies, storage operators must make all available resources accessible to the system operator.

Clean Energy Obligations and Decarbonization

The regulation reinforces Mexico’s clean energy obligations under Title V, mandating the ministry to establish binding mechanisms to advance the energy transition and reduce emissions. CNE will issue administrative provisions governing Clean Energy Certificates (CELs), their issuance, trade, and cancellation, through an electronic registry.

CELs will continue to serve as the key instrument for meeting Mexico’s clean energy targets and tracking the share of renewable electricity consumed by qualified users and industrial consumers. The framework also allows the ministry to pursue international homologation of CELs with similar certificates in other jurisdictions, provided transparency and traceability criteria are met.