The ministry said it was already looking ahead to obvious challenges that would arise in a post privatised power sector; hence, its decision to initiate the review of the electricity legislation which was made in a period when the power sector was wholly a federal government affair.
According to a statement from the ministry in Abuja, its intention for the planned review of the 2005 EPSR Act which was borne out of the 2003 National Electricity Power Policy, NEPP, was to ensure that maximum benefits from ongoing reform process in the power sector would accrue to Nigerians. While justifying its plans, the statement which was signed by its Deputy Director, Media, Timothy Oyedeji, stated the review was expected to address issues of electricity asset vandalism as well as local content development in the sector. He also added the review process had been planned to be transparent and open for audit while extant rules guiding the sector would be adhered to avoid incidences of investment flights. Although much of the buzz around Mexico’s energy reform focused on the oil & gas sector, the Mexican power sector also underwent a fundamental change. The Act allows private entities to participate in the generation and marketing of electricity for the first time via a wholesale electricity market (the “Wholesale Market”), a spot market in which certain generators and suppliers (essentially authorized marketers) together with qualified users, (the “Wholesale Market Participants”) can sell, and qualified users can purchase, electricity and related services at prices based on the cost of production. Most importantly, electricity reform in Mexico has created new opportunities for private investors, given new roles to state-owned companies under conditions that promise to limit their ability to dominate markets and created new governmental authorities (and enhanced the powers of existing ones) to regulate the electricity sector. To generate electricity, a power plant owner (a “Generator”) must obtain a permit from the regulator or be exempt from such a permit.
In contrast, permitted Generators have the right to sell electricity directly in the Wholesale Market or alternatively via power purchase and sale agreements with Suppliers or other permitted Generators.
Under the Act, a power marketing company which sells power is a “Supplier” and is required to obtain a specific permit from the regulator. The supply agreements between Suppliers and final users will take the form approved by the regulator. Qualified Users are entitled to purchase electricity directly from the Wholesale Market if they either consume over 5 MW or already supply their own electricity. Consumers that do not consume over 5 MW or supply their own electricity are deemed “Basic Supply Users.” These users are largely residential or small commercial users, the supply to whom is a high-priority to, and thus remains the responsibility of, the Comision federal de Electricidad (CFE). Before the Act, CFE had been vertically integrated and operated the national grid and the transmission, distribution and supply of electricity within Mexico. CFE (through its affiliates and subsidiaries) remains the entity responsible for power transmission and distribution, although private investment may participate in such segments through the financing or construction of related infrastructure. The CFE newly spun-off dispatch division now named Centro Nacional de Control de Energia (“CENACE”), monitors the Wholesale Market to ensure fair competition and efficiency and prevent discrimination in the provision of access to the transmission infrastructure.


Wholesale Market Participants are required to enter into an agreement with CENACE (the form of which is to be standardised by the regulator) before they are able to participate in the Wholesale Market.
The Comision Reguladora de Energia (“CRE”) is the regulator of the Wholesale Market under the Act. CRE will also issue rules governing transactions between affiliated companies to ensure that there is separation between entities participating in the relevant activities of the electricity industry. The introduction of greater private investment, combined with the approach of greater transparency in the sector will provide for greater competition in the electricity industry.
Although distribution and transmission remain state-run activities, the new potential for private entities to finance, construct and operate necessary distribution and transmission infrastructure could bring much-needed investment and upgrading to the transmission networks in Mexico. Although the decrees to enact the Act have been signed, it may take some time for them to be fully implemented. The King & Spalding Energy Law Exchange provides energy professionals and lawyers with valuable insights on the latest topics, trends and developments affecting the industry. The ministry is neither trying to change its mandate nor take over the functions of the regulator as alleged in the article.
It is therefore necessary that the ministry ensures that everything that can be done is done to achieve success. Together with eight new and twelve amended federal laws, Mexico’s President, Enrique Pena Nieto enacted the Ley de la Industria Electrica (the “Act”) on August 11, 2014. It also prevents a single entity from carrying out more than one of the following activities: generation, transmission, distribution, marketing or supply of electricity. To be exempt, the Generator must have a capacity of less than 0.5 MW and no participation in the Wholesale Market.
These Generators may not participate in the Wholesale Market on behalf of exempt Generators, nor provide electrical services directly to final users.
Suppliers purchase electricity from permitted Generators, exempt Generators or the national grid, and resell the energy to end users operating within the area allocated to them in their permit. Now, CFE is a “state productive entity”, a for-profit company which, together with its subsidiaries, will compete with both domestic and international power companies at all levels of electricity production. Under the rules providing for the separation of activities, CFE’s transmission and distribution subsidiaries may not purchase or sell the electricity flowing through their own lines.


They must also submit their operating costs and prices to CENACE, which will set the spot price for electricity.
It issues Generator and Supplier permits, sets the tariffs for energy services and issues standard form contracts for agreements between CENACE and Wholesale Market Participants. The private entities entering the sector will bring with them experience and new technology.
The Act is being implemented in stages, with the first steps being the decentralization of CENACE, the separation of CFE’s powers via subsidiaries and affiliates and CRE’s issuance of standard form contracts.
The firm is one of the most active law firms in the global energy industry advising and representing clients on a broad spectrum of transactions and disputes. NEW DELHI: The government will bring a Bill, amending the Central Electricity Act, in winter session of Parliament to improve the tariff policy and regulations in the power sector. With this information, CENACE will be able to assess whether electricity is being priced competitively in accordance with the rules governing the Wholesale Market. The Act encourages CFE entities and subsidiaries to enter into agreements and joint ventures with these private entities in the hope that CFE will acquire the latest technological knowhow.
The power ministry is working out different tariff structure for different times of the day for easy availability of power for maximum hours in electricity deficit areas. Therefore it may some months before private companies are able to enter into the relevant agreements with CENACE. It will soon consult states over the issue as the tariff matter comes under the states' domain. Our government is committed to transformational changes and not incremental changes." Announcing other measures to enhance power production in the country, Goyal said his ministry was working out with states to sort out pending issues due to which power projects have been held up.



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Comments

  1. QaQaSh_099
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  2. f_a_r_i_d
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