Mexico’s Electricity Sector Law: what industry needs to know

Correction note. The first version of this article used an incorrect name for the law. The instrument is the Electricity Sector Law, published in the Official Gazette (DOF) on March 18, 2025, with its Regulations published on October 3, 2025. This update also removes statements that could not be verified against the text of the law.

What it is and what it replaced

The Electricity Sector Law (LSE) governs generation, transmission, distribution and sale of electricity. It repealed the 2014 Electricity Industry Law (second transitory article). Generation permits are now granted by the National Energy Commission, CNE (arts. 18 and 151); operational control of the system and grid access remain with CENACE (art. 123).

Three generation figures

The law recognizes three figures (art. 17):

• Distributed generation: plants under 0.7 MW connected to distribution circuits (art. 25).
• Self-supply: generation of 0.7 MW or more for one’s own needs (art. 30).
• Generation for the wholesale electricity market.

Plants of 0.7 MW or more need a CNE permit; below that they are exempt generators. Plants of any size used only during emergencies or supply interruptions need no permit (art. 19).

Self-supply: grid-connected or isolated

• Grid-connected (art. 30): between 0.7 and 20 MW it may follow a simplified procedure under CNE guidelines.
• Isolated (art. 31): no grid connection, with all consumption inside a private network.
• Surplus (art. 32): it can only be sold to the state-owned utility, with a valid permit and interconnection contract. If the plant is intermittent (solar or wind) and exports to the grid, it must have its own storage backup or pay for it.

For industry the practical consequence is clear: a self-supply project that does not rely on selling power to the market, but on buying less of it, is the most resilient to regulatory change. And a solar plant that intends to export needs to plan for storage from the design stage; see hybrid and BESS.

Cogeneration

• A generation permit may include the cogeneration modality (art. 18).
• Cogeneration exists when electricity is produced together with steam or other secondary thermal energy, when unused process heat is used, or when fuels produced in the process itself are used (art. 41).
• Permit capacity is limited to the power obtainable from the process’s unused thermal energy (art. 42).
• Cogenerated energy has must-run dispatch, limited to the energy derived from the process’s thermal needs and to a capacity no larger than those needs (art. 43).

In other words, the law favors cogeneration sized to process heat, not plants oversized to sell electricity. More in industrial cogeneration in Mexico.

Clean Energy Certificates (CEL)

• The Ministry of Energy sets CEL requirements as a share of the energy consumed at load centers (art. 143), each year in the first four months, for the following three years (art. 145).
• Obligations apply to suppliers, qualified users participating in the market and end users receiving energy through self-supply (art. 147, sec. I).
• The Ministry defines the criteria to recognize which generators produce from clean energy, and CNE grants the certificates (art. 147, secs. II and III).
• CELs are tradable and valid for 30 months from issuance (art. 146).

Whether a project can earn CELs depends on those criteria; confirm it before including them in the business case.

Mixed schemes with CFE

For larger projects, the law allows mixed-investment schemes in which CFE holds at least 54% (art. 40), with terms of up to 30 years under the Regulations (art. 73). See CFE mixed schemes.

Risks to weigh

• Regulatory change: a plant runs for many years; contracts should anticipate changes in tariffs or interconnection conditions.
• Permit and interconnection timelines: the planning bottleneck. Interconnection studies can be requested before holding a generation permit (art. 49); see grid interconnection.
• Gas price: a gas-fired project should also be tested under a high gas-price scenario.

Steps to take

• An energy assessment of your electric and thermal profile.
• A review of your CEL obligations with legal counsel.
• Choosing the figure: grid-connected self-supply, isolated, or generation for the market.
• Reviewing your CFE supply contract and the site’s interconnection conditions.
• Starting CNE and CENACE filings early: see permitting and development.

This article is for information only and is not legal advice.

Sources

• Electricity Sector Law, DOF March 18, 2025: arts. 17, 18, 19, 25, 30, 31, 32, 40, 41, 42, 43, 49, 123, 143, 145, 146, 147 and 151, and second transitory article.
• Regulations of the Electricity Sector Law, DOF October 3, 2025: art. 73.