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Mexico's CFE hikes transmission fees 800% for clean energy generators

Highlights

Transmission fees for high tension up more than 400%

Measures could be challenged in court: sources

Mexico City — Mexico's state-owned utility CFE published June 10 new transmission fees applicable immediately to energy generators with increases of as much as 800%, which sources say could bankrupt market participants.

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The energy regulatory commission CRE had authorized changes to these transmission fees May 28 after requests from the CFE, which claimed those fees did not correctly reflect the costs associated with the service. Sources told S&P Global Platts the measure would likely be fought in court, but if applied could potentially bankrupt companies with tight finances.

The Confederation of Industrial Chambers of Mexico said June 10 it condemns the decision as it would increase final prices to consumers.

State utility CFE published June 10 that the new transmission fees for high tension applicable to energy generators with legacy permits as of June changes from Peso 0.049 to Peso 0.27857, a 469% increase. Medium tension fees was changed from Peso 0.049 to Peso 0.2586, a 428% increase, while low tension fees were raised over 800%, from Peso 0.09799 to Peso 0.8928.

Legacy permits, called so because they were obtained by generators before the 2013 reform, enjoy low tariffs as a way to incentivize the investment in clean energies. CFE considers these legacy permits unfair.

"Legacy permits have been used to create a 'black market' where companies actually buy and sell electricity," Mario Morales, the CFE's head of legacy permit administration said during a June 9 conference.

This black market cost the CFE an average of Peso 7.6 billion ($362 million) a year during the last three years, Morales said.

However, the lawyers Platts spoke with said changing the tariffs was "illegal," and could prompt companies to challenge the change.

Pedro Llado, a senior associate specializing in Mexico´s energy industry at law firm Gonzalez Calvillo, said the transmission fees charged to legacy projects might have been estimated under a different logic than the one that exists currently.

After the methodology used to estimate the tariffs changed as a result of the 2013 energy reform, the CFE might have realized the old transmission tariffs were different, but was unable to modify them, Llado added.

"Changing the rights already granted to energy generators under enforceable contracts and permits is not only away from Sener, and the CFE´s control, it cannot in some cases be done even by congress through federal law, where the effects of such law may violate rights protected under the Mexican constitution or international agreements ratified by Mexico," he said.