• 17 March 2020

Amendment to Article 28 of the Constitution and its implications in insolvency procedures

Luis Guillermo Pineda Bernal commissioner of the Energy Regulatory Commission ("CRE") warned that those participants from the electricity industry who do not comply with the Network Code will face severe sanctions. The sanctions currently provided in the Network Code are:

1) From 2-10% of the gross income received in the previous year.

2) A fine of between $4,344,000 and $17,376,000 MX.

3) Submit a work plan to remedy the non-compliance to the CRE.

The Network Code contains the general administrative provisions that establish the criteria of: efficiency, quality, reliability, continuity, safety and sustainability of the National Electric System and is mandatory for all members of the electric industry that make use of the National Electric System's infrastructure.

In spite of the fact that the Network Code is mandatory and should have been implemented since April last year, up to now no sanctions have been applied for non-compliance. This, according to the commissioner, is due in part the cuts in the Federal Government's budget. The CRE does not have the necessary resources to verify compliance, since inspection and verification units are needed. However, the commissioner emphasized that the difficulties that exist to verify compliance do not exempt companies from their obligations and, moreover, that measures are already being implemented to remedy this situation.

In addition, the Network Code is expected to be extensively amended. On July 22nd of last year, a process of analysis of high regulatory impact was initiated before the National Commission of Regulatory Improvement ("CONAMER"). The analysis is already in its final stages and it is expected that the CONAMER process will soon be completed and the amendment to the Network Code will be published in the Official Gazette.

This scenario presents significant adaptation and implementation challenges for electricity industry participants. At SOLCARGO, we are ready to advise our clients and help them avoid sanctions and damage to their companies.

In case of any inquiries about the content of this Alert, please contact:

Cecilia Curiel(cecilia.curiel@solcargo.mx)

Constanza Aguilar(constanza.aguilara@solcargo.mx)

Jose Valencia(jose.valencia@solcargo.mx)