Sunday, Mexico´s Senate voted 88 to 26 in favor of a new electricity law that allows private power generators to sell directly to users. The Electricity Industry Act will go to the Chamber of Deputies for additional legislative processing. Major reforms and privatization in the energy sectors are centerpieces of President Enrique Peña Nieto´s economic agenda.
The Federal Electricity Commission (CFE), a state-owned utility service, is the dominant power generator. In 1992, the Mexican power generation sector was opened to private entities. Since then, private companies have had to sell their output to CFE since it operates the transmission grid. This old system allowed the government to control prices for electricity.
The law passed this Sunday changes that. The new law creates the National Center for Energy Control (CENACE) and declares that power is a public interest service. However, that the generation and sale of electricity should be carried out within a "system of free competition." The Energy Regulatory Commission will establish mechanisms to calculate rates according to the law.
The legislative package during this Sunday´s session also included a Geothermal Energy Act. This act would allow the regulation of geothermal development in the country. Last week, the Senate also passed a bill to reform the hydrocarbons sector (oil and gas) allowing for private exploration and development, the first time in the sector's history since it was nationalized in 1938.
Last year Peña Nieto also pushed the reform ending Pemex´s 75 year oil and gas monopoly allowing for other private companies production and exploration.