Overview of Mexico’s New Energy Legal Framework

In a sweeping regulatory reform initiated in early 2025, Mexico has restructured its electricity and hydrocarbons sectors. The new legal framework not only strengthens state control and oversight but also preserves private investment opportunities, ensuring energy justice, sustainability, and national sovereignty.

Key Components

1. New Energy Laws Package

• Electricity Sector Law (LESE):

1. Governs generation, storage, transmission, distribution, and commercialization of electricity.
2. Ensures state dominance by requiring that at least 54% of grid-injected energy is generated by the state.
3. Introduces innovative schemes such as mixed development, self-consumption, and regulated electricity storage and electromobility.

• Hydrocarbons Sector Law (LSH):

1. Regulates exploration, extraction, processing, and commercialization of hydrocarbons.
2. Prioritizes Pemex’s role with new allocation methods for both exclusive (“own development”) and joint (“mixed development”) projects.
3. Enhances oversight through stricter volumetric controls and increased reporting requirements.

• National Energy Commission Law (CNE Law):

1. Consolidates regulatory powers previously held by the CRE and CNH into the new National Energy Commission, which operates under the Ministry of Energy (SENER).
2. Introduces a streamlined organizational structure led by a General Director and supported by a Technical Committee to manage permits and enforce regulations.

2. Reorganization of State-Owned Companies

• Federal Electricity Commission (CFE):

1. Transitioned into an independent public entity under SENER with its own legal personality.
2. Directly manages transmission, distribution, and commercialization, absorbing former subsidiary functions.
3. Retains the ability to create subsidiaries for generation and telecommunications, while continuing pre-existing contracts and guarantees.

• Petróleos Mexicanos (Pemex):

1. Restructured as an independent public company to ensure national energy security, sustainability, and self-sufficiency.
2. Former production subsidiaries (e.g., PEP, PTRI, and PLOG) will be dissolved, with their obligations assumed by Pemex.
3. Empowered to form alliances and enter mixed development agreements with private entities, while remaining directly responsible for exploration and extraction activities.

3. Supportive Regulatory and Planning Measures

• Energy Planning and Transition Law (LPTE):

1. Establishes a framework for sustainable energy transition, emphasizing clean energy, pollution reduction, and the incorporation of energy justice and poverty considerations.
2. Mandates detailed planning instruments (such as national transition strategies and sector development plans) and primarily relies on public financing, while allowing private participation.

• Biofuels Law:

1. Replaces a 17-year-old regulation to promote sustainable biofuel production, emphasizing energy sovereignty and environmental protection.
2. Assigns regulatory responsibilities to SENER, with supporting roles for the Ministries of Agriculture and Environment.
3. Introduces fiscal and financial incentives to promote the valorization of organic waste and biomass production.

• Geothermal Law:

1. Regulates the exploration and exploitation of geothermal resources, including provisions for small-scale exempt operations and diverse usage permits.

• Amendments to the Hydrocarbons Income Law:

1. Establish the “oil right for welfare,” requiring Pemex to contribute annually to social welfare funds based on hydrocarbon production volumes.

Conclusion

These reforms represent a comprehensive overhaul of Mexico’s energy sector. By reassigning regulatory functions, reorganizing state-owned enterprises, and introducing new planning and environmental standards, the new framework aims to balance state control with private sector participation, ensuring a more sustainable, just, and secure energy future for Mexico.

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