Several generators that supply energy to Coca-Cola FEMSA filed appeals against recent regulations issued by the Mexican federal government on renewable energy.

In the context of the energy industry, the current Mexican federal government has publicly stated that one of its objectives is to strengthen the Federal Electricity Commission (CFE).

In this sense, during the second and third quarters of 2020, the government authorities of the electricity sector (that is, the National Center for Energy Control), the Energy Regulatory Commission (CRE) and the Ministry of Energy) issued certain orders, resolutions and public policies imposing restrictions and additional requirements for the development, construction and / or operation of intermittent renewable energy projects, in particular, photovoltaic solar and wind power plants.

Consequently, in May 2020, the CRE, as the regulator of the Mexican electricity sector, approved an increase in the transmission cost applicable to holders of legacy interconnection contracts (holders of legacy interconnection contracts) that produce energy from energy sources. renewable or efficient sources of cogeneration.

Coca-Cola FEMSA

The vested projects are those subject to the rules in accordance with the applicable laws prior to the 2013-2014 Mexican energy reform.

Coca-Cola FEMSA stated that this new cost for the transmission service constitutes an increase for renewable projects with acquired rights that was applied by CFE as of July 2020.

While the entities legally obliged to pay these transmission costs are the generators (that is, holders of the interconnection agreements with acquired rights), depending on the structure agreed in the corresponding energy supply / delivery contracts (PPA) (for For example, such as a transfer of such transmission costs or a change in the law), end users under the protected self-supply scheme may run the risk of transmission costs and be obliged to pay the corresponding generator for said incremental costs.

In other words, according to Coca-Cola FEMSA, buyers (as self-sufficient consumers) would bear significant energy-related costs with respect to their operation.

«Several affected parties have filed several constitutional challenges (amparos) against said increase in transmission charges, including generators with which we have signed a PPA,» said Coca-Cola FEMSA.

Process

The Mexican federal courts have granted a permanent injunction (definitive suspension) regarding said increase in favor of most of the generators with which Coca-Cola FEMSA has entered into power purchase contracts, except for one generator, which obtained a temporary court order (temporary suspension) and hopes that a permanent amparo will be granted on the hearings held in his amparo process.

Coca-Cola-FEMSA added that in the event that a permanent precautionary measure has been granted, the new transmission costs will not apply during the course of the corresponding injunction.

Ultimately, the courts will have to decide on the merits of the amparo challenge and whether or not to defend the CRE‘s resolution by which these incremental transmission costs were established for vested renewable / efficient cogeneration projects.