Mexico drops plan to take over independent power plants

Mexico has backed down in a major dispute with the country’s independent power producers (IPPs) and will not seek to take over their power plants when generation permits expire.

In draft guidelines published on Tuesday, the energy ministry said it will not force IPPs to sign up to the new long-term producer scheme. The scheme, introduced in 2025, gives state-owned utility CFE the right to acquire power plants at no cost at the end of its contract with the private company.

A first draft, published in December and withdrawn the same month after an industry backlash, would have required IPPs to migrate to the scheme.

The latest draft gives IPPs more permitting options. They can choose to generate for the wholesale market, sign a contract with CFE for at least 30% of their output, or join the long-term producer scheme without being required to transfer their plants to CFE.

According to the document, this aims “to provide legal certainty regarding the infrastructure at the end of the contract term.”

New generation permits will last for up to 15 years. The earlier draft proposed granting IPPs just five extra years beyond the duration of their existing contracts.

The permits held by IPPs were awarded under a previous legal framework. The draft guidelines, published on the website of the regulatory improvement commission on Tuesday, detail how IPPs can migrate to the new regulations on a voluntary basis.

Modernization

According to the Mexican energy association, the 34 independent power producers in the country represent more than 18GW of capacity, or about 20% of the total.

They generate electricity from combined-cycle gas turbine plants and wind farms and sell their power to CFE.

According to the guidelines, IPPs will have to submit details about plans to modernize and improve their plants when applying to the regulator for new permits.

The energy association had said the earlier draft of the guidelines “could be construed as indirect expropriation.” The proposal was also criticized by the US.

(The original version of this content was written in English)