●As of March 31, 2022, new requirements to apply and obtain electricity generation permits are established, thereby instituting a notoriously more onerous and discretionary process.
●Among many other new requirements (included below), Applicants are now required to submit an Impact Study from Mexico’s independent operator the National Centre for Energy Control as part of the Application.
●The commencement of operations of power stations is subject to the rules on quality, reliability, continuity, safety and sustainability of the SEN (national grid), which results in a broad margin of discretionarily for the authorities.
● Any Permit applications submitted prior to the effective date of the Order (March 31, 2022) will be resolved in accordance with the Old Provisions.
Today, Mexico’s Energy Regulatory Commission (“CRE”) published the Order that contains the General administrative provisions establishing the terms to submit information related to the corporate purpose, legal, technical and financial capabilities, as well as the project’s description, and the application form for electricity generation permits (the “Order”). Here you may access the official publication.
I. Background.
On April 8, 2015, the CRE published Resolution number RES/182/2015, issuing the General administrative provisions establishing the terms to submit the information related to the corporate purpose, legal, technical and financial capabilities, as well as the project’s description, and the format of the application for electricity generation permits (the “Old Provisions”).
At the time, through the Old Provisions, the CRE established the requirements, documentation, and the form that the parties interested in obtaining an electricity generation permit shall submit with their application (the “Application”) in accordance with article 130 of the Law of the Electricity Industry (“LIE”) and its Regulations.
In accordance with the considerations (i.e., legal/regulatory basis) of the Order, the CRE mentions that the Old Provisions shall be updated in order to improve the allocation of resources between the State’s productive enterprises (i.e., the Federal Electricity Commission (“CFE”)) and private companies, in order to protect the interests of users.
Although the Old Provisions had as purpose to establish a series of requirements to evidence the legal, technical and financial capabilities of the applicants, the Order adds a fairly broad list of other (new) requirements that shall be evaluated by the CRE as part of the power generation permit (“Permit”) application process.
II. Content of the Order.
In order to address the main changes established by the Order vis-à-vis the Old Provisions, we will make reference to the new requirements, as well as the additional information that the CRE will require regarding existing requirements.
A. Legal capacity and feasibility of the project.
Tax identification card of the applicant, the partners, or shareholders and of the persons or groups of persons who have control of the permit holder's company.
In other words, not only the tax information of the Permit applicant is required, but also that of all the shareholders and even person(s) who exercise control over it. In case of foreigners, this can complicate the delivery of a tax identification card, unless its equivalent in other jurisdictions is allowed to be delivered as well.
(ii)Include information regarding the applicant's share capital structure through the form1 by means of which the CRE may have knowledge of all direct and indirect shareholders, the different shares they hold, as well as the rights that these grant.
(iii)A highly detailed description of the project, which shall:
1.Indicate whether it will be a power plant under the classification of “isolated supply” interconnected or not to the National Electric System (“SEN”), in which case it must describe its own needs.
2. In the case of the classification of “isolated supply” in the description of own needs, at least the following must be detailed: (a) indicate through what type of supplier they will obtain the shortages required in case of being interconnected to the SEN; and (b) information about load tables and load center.
3.Type of technology (providing the respective technical sheets of the equipment associated with the generation) and if applicable, the primary fuel and, if appropriate, the secondary fuel, heat value of both, consumption, cost, data of supplier and shipper or distributor of said fuels, as the case may be, as well as their current permit granted by the CRE.
4. Indicate if it corresponds to the Mobile Power Plant Unit.2
5. Soft copy of the original document issued by the National Center for Energy Control (“CENACE”) indicating the result of the Impact Study or the rapid version impact, corresponding to the procedure to handle the request for interconnection of power plants or connection of load centers.
6. Indicate whether the power plant will have an energy storage system, thereby being required to submit detailed information on the system.
7. Submit a detailed works program, regarding the activities necessary to carry out the project from the Previous Activities3 and until the Commercial Operation Date.4
8.The Business Plan in case the power station is not installed. Said plan deals with the general costs involved in commissioning the project, such as: (a) investment amount of the project; (b) cost of the works; (c) cost of facilities, machinery, land, and/or equipment/vehicles (vehicle units), technology, if applicable; and (d) cost of procedures; among others.
B. Financial Capability.
Regarding this item, the financial statements must be audited by an accountant who has a valid registration in the Registry of Public Accountants of the Tax Administration Service (“SAT”) for at least two (2) years prior to the date of the Application.
C. Technical Capability.
In connection with this requirement, the applicant is required to submit documentary evidence that it has its own or subcontracted technical and material resources to carry out the different stages of the project mentioned above. In addition, it shall submit all the information regarding human resources, own materials or service contracts with third parties that the applicant has.
III. Conclusions.
The Old Provisions are repealed as of March 31, 2022.
With the effective date of the Order, the Application for electricity generation permits will entail a greater burden for the interested parties
In this way, the CRE may block obtaining said permits, moving away from its main objectives, which are to improve user services.
The applications that were submitted prior to the effective date of the Order, will be subject to the Old Provisions.
Campa & Mendoza
contacto@campaymendoza.com
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If you have any questions or comments on the matter, please contact us.
This document does not constitute legal advice.
1 The form shall be filled out in the case of individuals or legal entities.
2 It is understood by Mobile Power Plant: the power plant that can be transferred to different interconnection points of the SEN, without disassembling the main equipment.
3 Preliminary Activities are understood as: the period in which activities related to the necessary steps are considered to be able to start the construction of the plant that depend on the authorization of federal, state or municipal authorities.
4 Commercial Operation Entry is understood as: date from which CENACE declares the entry into operation under normal conditions, considering compliance with the Grid Code, the Validation of Technical Requirements and the Commercial Operation.
