Written by Takahiro Miyazaki and Elizabeth Bestwick.
See Japanese translation here.
Mexico’s latest proposed energy reform establishes a new regulatory framework that gives the government greater control over electricity generation and oversight. These changes reduce private sector participation, introduce new permitting rules, and increase political influence over key energy decisions.[1]
At the center of the reform, the government replaces independent energy regulators with the National Energy Commission (CNE), which will be controlled by the Ministry of Energy. CNE lacks financial independence and protections against political interference, meaning permits, compliance, and enforcement will be at the government’s discretion.
State Control Over Energy: Market Share and Regulation
Mexico’s energy reform boosts government authority over electricity production and regulation, while curbing private competition.
The reform requires the Federal Electricity Commission (CFE), Mexico’s state-owned power utility, to generate at least 54% of the country’s electricity, leaving private companies with a 46% market share.[2] This shift guarantees CFE priority, even if private companies can offer cheaper or cleaner energy.
The reform also makes it more difficult for renewable projects to compete. It favors older, less efficient CFE plants, while imposing added costs on renewables through mandatory battery storage requirements.[1] Financial incentives for clean energy have also been weakened. For example, Clean Energy Certificates (CELs) are now extended to decades-old CFE plants, reducing their value and undermining private investment in renewable infrastructure.[1]
In addition to changing the competitive landscape, the reform eliminates independent regulatory bodies and shifts all oversight responsibilities to the CNE. Unlike previous regulators, CNE’s leadership can be dismissed at the President’s will, injecting more political influence into energy sector decision-making. This creates concerns about unpredictable enforcement, shifting policies, and heightened risk for investors navigating long-term infrastructure projects.
Investor Risks and Market Uncertainty
The reform introduces greater uncertainty for both domestic and international investors. Without independent oversight, energy policies could change abruptly, leading to compliance challenges and higher risk exposure. The 54% cap on private sector generation and new restrictions on grid access further limit competitiveness.[2]
Moreover, with the government in full control of permit approvals, companies may face delays, contract uncertainty, and administrative barriers that complicate entry into the market.
Conclusion
The legislation is still pending, with final rules around pricing, market operation, and social impact requirements yet to be released. These forthcoming regulations will shape the practical implementation of the reform. Until then, investors should anticipate volatility and remain adaptable.[1]
Mexico’s energy reform locks in state control, reshapes market access, and increases political influence over the sector. While the government promises long-term stability and national energy strength, private companies will face structural challenges. To adapt, investors should closely monitor legal developments, reassess exposure, and seek specialized guidance. The true impact of this reform will ultimately depend on how effectively these sweeping changes are put into practice.
Sources
[1] Atlantic Council. (2025, March). Mexico’s New Electricity Law Could Boost the Country’s Energy Sector. Atlantic Council. https://www.atlanticcouncil.org/blogs/new-atlanticist/mexicos-new-electricity-law-could-boost-the-countrys-energy-sector/
[2] PV Magazine Mexico. (2025, March 18). Quedan concretadas las leyes secundarias de la reforma energética. PV Magazine Mexico. https://www.pv-magazine-mexico.com/2025/03/18/quedan-concretadas-las-leyes-secundarias-de-la-reforma-energetica/