• Terms for
    the strict legal

    unbundling of CFE
  • Daniel Sánchez and José Ignacio Segura Alonso
    Partners at White and Case
  • The Terms for the Strict Legal Unbundling of Federal Electricity Commission (the Unbundling Rules) were published in the Federal Newspaper (Diario Oficial de la Federación) (DOF) on January 11, 2016. The main purpose of those rules is to set the terms of strict legal separation required to foster the open access and the efficient operation of the electric sector, in such way that Federal Electricity Commission (CFE) will be allowed to participate in the market through independent entities to be incorporated and, hence, create economic value and profitability to the Mexican State.

    Main features stated in the Unbundling Rules:

    1. Legal separation; independent activities
    CFE shall perform, activities independently from each other, under conditions of strict legal separation, through Productive Subsidiary Companies (EPS), such as the Generation, Transmission, Distribution, Basic Supply, Marketing different from Basic Supply and Provision of Primary Supplies. Vertical separation between the activities in networks (transmission and distribution) and those activities related to the competitive market (generation and marketing). This separation assures that: (I) Generators and Suppliers shall have open access to the National Transmission Network and the General Distribution Network, and (II) Open access is a key condition to eliminate the barriers for the installation of new power plants and attract investments in the public sector.


    Through EPS, affiliates or any other type of association permitted by the CFE Law.[1]

    Except for certain cases, they will be barred from performing directly or indirectly any activity relating to Transmission, Distribution, Marketing or Provision of Primary Supplies.

    » Horizontal separation

    Number of generators that assures an efficient operation, promote economies at scale and are subject to free competition.

    - They may only represent at the Wholesale Electric Market (WEM) those power plants which are administered by them.

    They may contract a producer to represent Power Plants administered by them before the WEM.

    Players will create economic value and profitability to the Mexican State

  • » Assignment of Assets and Contracts for Generation

    - Ministry of Energy shall determine the assignment of Power Plants and Contracts to each CFE entity to make sure that they participate at the WEM with no market leverage either at national or regional levels.

    - Provide that each has similar conditions of financial independence and profitability,

    » Vertical separation
    Through an EPS. These may form associations or hire with an EPS, Affiliate and private parties the financing, installation, maintenance, administration, operation and expansion of the National Transmission Network.

    » Horizontal Separation

    At least 1 EPS.

    » Vertical separation

    » Through EPS’s created for Distribution purposes.

    » Horizontal Separation
    - At least 1 Distribution EPS that shall have 1 Business Unit for each of the 16 regional divisions of CFE in charge of providing the Distribution utility service.

    Basic supply
    Through one EPS or Affiliates.
    In charge of supplying electric energy to retail users with a load less than 2 MW starting in 2016.

    Marketing different from Basic Supply
    Qualified Supply, Last Resource and Marketing not associated to Supply.

    » Horizontal separation
    If an affiliate performs more than one activity of marketing, the CRE may establish an accounting separation.

    2. Corporate governance
    The Unbundling Rules regulate the appointment, integration and operation of the different governing bodies of the EPS and Affiliates to be incorporated, including qualification requirements, authority and responsibilities of whoever is appointed as Director General of each entity.