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Mexico liberalizes electricity generation

Mexico's Senate has passed a law that will allow private power generators to sell electricity directly to users. It's another step in a major reform and privatization of the country's energy sectors.

Mexico's Senate voted 88 to 26 on Sunday (20.7.2014) in favor of a new Electricity Industry Act, which will now move to the Chamber of Deputies, the lower house in Mexico's parliament, for further legislative processing.

In Mexico, the Federal Electricity Commission (CFE), a state-owned utility, is the dominant power generator, with two-thirds of installed capacity. CFE also operates the national transmission grid.

The power generation sector was opened to private participation in 1992, but until now, private generators have had to sell all their output to CFE - they have not been allowed to sell directly to users. This system allowed the government to directly control the price charged for electricity.

The new law changes that. It creates a National Center for Energy Control (CENACE) and states that the power supply is a service of public interest, but the generation and sale of electricity services are to be provided within "a system of free competition."

Mexico set for energy Reform

The law stipulates that the Energy Regulatory Commission (CRE) shall establish mechanisms to calculate the maximum rates that may be charged for electricity.

Sunday's legislative package also included a Geothermal Energy Act to regulate the development geothermal resources for electricity generation in the country.

The electric power generation reform is the second major energy sector reform the new government of President Enrique Pena Nieto has introduced. Last week, the Senate passed a bill to reform the hydrocarbons sector (oil and gas), opening it to private exploration and development for the first time since the sector was nationalized in 1938.

nz/uhe (Reuters, EFE).