CRE proposes to increase requirements to obtain generation permits
Proposal open for comments from the industry
Impact study obligations among new requirements
The Mexican Energy Regulatory Commission is planning to make it tougher for companies to obtain permits to generate electricity in the country that could further erode competition in the sector in favor of the state utility CFE, source said Dec. 27.
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Register NowThe Regulatory Commission, or CRE, is proposing to increase the requirements to obtain a generation permit in a proposal presented Dec. 23 and now open for comments from the industry.
Among the many proposed changes, CRE will require companies to present the results of an interconnection impact study of a project prior to obtaining a permit. The move represents a material change as companies present a study only after obtaining a permit under the current regulation.
The proposed modifications would alter the order of the legal steps to develop and operate energy projects in Mexico, law firm Cortes & Quesada wrote in a note to clients. The information required as per the new regulation would force companies to initiate the process at an earlier stage of development, the firm said.
The changes would also require companies to provide more data about the project's ownership, such as direct and indirect shareholders and their rights, as well as more information about the project, including investment return rates, total income projected, the share of equity and debt, and its financing period.
CRE said the modifications were required to "better allocate" companies' resources and "protect consumers". Observers warn if the proposal is approved it could make it more challenging for private companies to compete with the state. Law firm Campa & Mendoza wrote in a note to clients that the regulation could be used to restrict projects seen competing directly with CFE.
"It would grant greater discretion to CRE to deny permits as it will consider criteria related to the reliability safety and continuity of the national grid in all cases," the firm said, adding that the new requirements may slow the granting of permits.
The proposed regulation comes as the Congress prepares to discuss and vote a presidential initiative to modify the constitution to give CFE overall control of the power sector. The initiative contemplates making CFE a constitutionally independent agent in charge of planning and transferring the regulatory attributions of CRE to the energy Secretariat.
The initiative calls for CFE to generate 54% of all the power needed in the country with its own plants, higher than the current 38%.
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