On 31 December 2021, the Energy Regulatory Commission (CRE) published in the Mexican Official Gazette, resolution number RES/550/2021, through which it issued the General Administrative Provisions containing the criteria for efficiency, quality, reliability, continuity, safety and sustainability of the National Electric System: Network Code (New Network Code).
This New Network Code came into force as of 1 January 2022 and, consequently, repealed Resolution RES/151/2016, of 8 April 2016, that published the prior Network Code.
This New Network Code modifies the technical requirements whose compliance is mandatory for all users of the National Electric System, i.e. the National Energy Control Center, transporters, distributors, power plants, suppliers and, in particular, all load centers connected at medium and high tension, regardless of their consumption levels.
The New Network Code establishes the technical requirements to be met by connected load centers, or intending to connect, to the National Electric System (SEN) at medium or high tension1, in order to guarantee the efficiency, quality, reliability, continuity, safety and sustainability of the SEN.
As of 1 January 2022, obligated load centers (connected at medium and high tension) must initiate the necessary actions to ensure compliance with the technical requirements under the New Network Code. It is important to consider that prior to the publication of the New Network Code, the prior Network Code published under resolution RES/151/2016 on 8 April 2016, (now repealed) was in force, whose technical requirements became mandatory as of 8 April 2019.
The New Network Code distinguishes load centers connected at medium and high tension. For medium tension, it is subdivided into two categories, namely: (i) those which contracted demand is under 1 megawatt; and (ii) those whose contracted demand is equal or greater than 1 megawatt. This distinction entails different regulatory requirements applicable to each category, as well as the possibility of complying with the technical requirements modified under the New Network Code during a transition period, as of its publication date.
In accordance with the Electricity Industry Law, failure to comply with the New Network Code may be sanctioned with (i) a penalty of 2 to 10% of the gross income received in the previous year; or (ii) a penalty of fifty thousand to two hundred thousand minimum wages, as the case may be. In this sense, we consider that it is relevant to implement a compliance and/or risk mitigation strategy against these possible penalties (in case of non-compliance or in the process of developing the applicable work plan).
Strategy design: next steps
We suggest analyzing and evaluating, from a legal standpoint, possible strategies for each medium or high-tension load center, including those that compiled with the previous Network Code, now repealed. Further, we recommend analyzing and evaluating those load centers that have an ongoing or open administrative procedure before the CRE.
We have prepared this Client Alert due to the importance of the issue, we suggest (i) to jointly review the technical-legal-regulatory status of the load centers for each user before the CRE, and (ii) to design a legal strategy to mitigate possible penalties, under the New Network Code.
Our Firm is at your service for any questions or assistance regarding this matter.