Environmental Analysis & Ecology Studies

The Mexican Electricity Industry Law. Climate Change: Between Nationalisation and Privatisation

José Juan González Márquez* and Ivett Montelongo Buenavista*

Full Professor and Researcher at the Metropolitan Autonomous University, Mexico

*Corresponding author:José Juan González Márquez and Ivett Montelongo Buenavista, Full Professor and Researcher at the Metropolitan Autonomous University, Mexico

Submission: January 29, 2026; Published: April 02, 2026

DOI: 10.31031/EAES.2026.13.000816

ISSN 2578-0336
Volume13 Issue 4

The 21^st century is marked by a significant environmental crisis, highlighting three interconnected threats primarily driven by human activity: climate change, biodiversity loss, and pollution¹ . Climate change refers to long-term variations in Earth’s temperature and weather patterns. As the United Nations has stated² :

Climate change refers to long-term shifts in temperatures and weather patterns. Such shifts can be natural, due to changes in the sun’s activity or large volcanic eruptions. But since the 1800s, human activities have been the main driver of climate change, primarily due to the burning of fossil fuels like coal, oil and gas.

Burning fossil fuels generates greenhouse gas emissions that act like a blanket wrapped around the Earth, trapping the sun’s heat and raising temperatures

Climate change is one of the most pressing issues for the international community due to its environmental impacts. Although natural factors also influence the planet’s climate, climate change is primarily driven by anthropogenic activities. The main human-caused factors include the burning of fossil fuels, deforestation³, agriculture and livestock farming, industrialisation, and waste production. Additionally, natural causes such as variations in Earth’s orbit, volcanic activity, and solar cycles also play a role in climate change⁴ .

The four most catastrophic effects of climate change worldwide are: 1) droughts and heat waves; 2) rising sea levels and flooding; 3) loss of biodiversity; and 4) problems in human health⁵.

To address climate change, the UNFCCC was signed in 1992, leading to the Kyoto Protocol, which entered into force in 2005 and was later replaced in 2015 by the Paris Agreement6. Under the terms of this international agreement, each country commits to determining its contribution to reducing greenhouse gas emissions. In 2025, Mexico submitted its Nationally

¹ OECD (2025) Environmental outlook on the triple planetary crisis: Highlights. OECD Publishing 2025, UK.
² United Nations (2026) What is climate change? United Nations, USA.
³ European Commission (2026) Causes of climate change. European Commission, Belgium.
⁴ United Nations Foundation (2026) What’s happening at the IPCC? United Nations Foundation, USA.
⁵ Ibid
⁶ United Nations Framework Convention on Climate Change (2026) The Paris Agreement. UNFCCC, USA.

Determined Contribution 3.0 (NDC 3.0). In this document, the country makes the following commitments⁷ :

1. It has committed to publishing the first National Adaptation Policy, which will be designed to strengthen the capacity to respond to socio-environmental conflicts arising from the effects of climate change.
2. For the first time, it incorporates a specific component on loss and damage, where climate-induced displacement and human mobility are identified as a priority, and reinforces the areas of adaptation, energy transition, the circular economy, the conservation of 30% of the territory by 2030, and the protection of rainforests, forests and mangroves.
3. It considers organic waste and domestic, commercial, industrial, microbial and enzymatic waste as alternative energy sources.
4. In order to effectively implement NDC 3.0, Mexico is committed to triggering concrete actions to promote financing, strengthen capacities at all levels of government and carry out other regulatory reform measures.

One of the main causes of greenhouse gas emissions is the consumption of fossil fuels, which intensifies the greenhouse effect and contributes to climate change. In Mexico, electricity generation is a significant source of these emissions because a large share of the country’s electricity is produced from fossil fuels such as natural gas, oil, and coal. The power sector accounts for about 18% of the country’s total greenhouse gas emissions⁸ .

Therefore, Mexico’s compliance with its international commitments is directly related to the energy transition, as it aims to reduce greenhouse gas emissions. This transition consists of four key aspects: decarbonisation, decentralisation, digitalisation, and democratisation-often referred to as the four Ds. Decarbonisation focuses on lowering greenhouse gas emissions by increasing the share of clean energy in the overall energy mix. Decentralisation refers to distributing energy generation sources closer to consumption centres. Digitalisation involves utilising digital technologies to enhance energy efficiency and management, particularly through smart grids. Lastly, democratisation entails ensuring access to energy for all, enabling communities to control their energy resources ⁹.

This article aims to unpack the legislation governing Mexico’s electricity industry to assess the extent to which it limits or promotes the energy transition and, as a result, enables the Mexican government to address climate change.

To achieve this aim, the paper is divided into four parts. In the first one, the origins of the energy regulations after the Mexican Revolution and the Mexican Constitution of 1917; the second part addresses about the nationalization of electricity sector and the regulations that made this sector into a Public Monopoly; finally, the third part shows the path to allowing private participation in electricity generation, the growing importance of clean energy, the slowdown of this trend from 2019 onwards with the idea of a new nationalism, and how it gradually changes again from 2024 onwards to attempt a majority participation of the State without preventing the involvement of the private sector and strengthening clean energy throughout this evolution.

This section examines the evolution of Mexican legislation in the electricity industry, emphasising how legal and policy debates over privatisation versus nationalisation have often sidelined renewable energy promotion, despite its potential to reduce Mexico’s contribution to global climate change. Addressing these challenges is crucial for advancing sustainable energy goals.

The original text of the 1917 Mexican Federal Constitution did not explicitly address the electricity industry. Companies in the energy sector were regulated, as were any other economic activities not considered strategic under Article 28 of the Constitution.

In that context, one of the first forms of regulation was President Venustiano Carranza’s initiative in 1917 to control these companies through the Department of Weights and Measures, to prevent malfunctioning measuring devices from causing abuses against users. Another attempt was the creation in 1922 of the Commission for the Promotion and Control of the Power Generation Industry. But the most important regulation of that era was the National Electrical Code of 1926¹⁰ .

This Code established federal regulation and oversight of the electricity industry, which had previously been managed by local governments. Although the Constitution of 1917 did not specifically address the electricity sector, the concept of nationalising it was a topic of public discussion. This atmosphere of free enterprise enabled the growth and consolidation of private monopolies between 1920 and 1938.

However, various decrees and regulations effectively undermined the Code’s provisions in favour of two major foreign companies that dominated the market: Electric Bond and Share and the Mexican Light and Power Company. These measures recognised the companies’ rights to the exclusive use of their transmission lines within their respective zones, which spanned almost the entire country. Additionally, the decrees allowed the renewal of the concessions under which they operated, even though these were set to expire under the 1938 law.

⁷ Greenberg Traurig LLP (2025) Mexico presents its nationally determined contribution 3.0. Greenberg Traurig, USA.
⁸ Climate Action Tracker (2026) Mexico: Policies and action. Climate Action Tracker, Germany.
⁹ Olawuyi DS, González JJ, Mostert H, Montoya MF, Banet C (2024) Net zero and natural resources law: sovereignty, security, and solidarity in the clean energy transition. Oxford University Press, UK.
¹⁰ This Code had one regulation published in 1928.

An essential attempt for the state to control the electricity industry was the approval of the Federal Electricity Commission Law (FECL) in 1937¹¹, followed in 1938 by the publication of the Electricity Industry Law (EIL)¹² .

The 1938 EIL stated that the Ministry of Economy could grant concessions for the introduction, generation, transmission, distribution, or sale of electrical energy, to Mexicans or Mexican companies. If these companies had foreign partners, they should have more Mexicans, and the foreigners must renounce their nationality in accordance with their status as partners.

Towards the late 1950s, private companies anticipated the nationalisation of the electricity industry and chose to sell their shares to the Mexican Government. This event marked the beginning of the nationalisation process for this industry.

In October 1960, the President of Mexico, Adolfo López Mateos, proposed a constitutional reform to nationalise the electricity industry. The proposal was approved by both houses of the Federal Congress, adding a sixth paragraph to Article 27 that stated ¹³:

The generation, transformation, distribution, and supply of electricity for public service purposes is the exclusive responsibility of the Nation. No concessions will be granted to private entities in this area, and the Nation will utilise the necessary assets and natural resources for these purposes.

Under the new constitutional basis, in 1975, the EIL of 1938 and the Decree Setting the Basis for the Functioning of the Federal Commission of Electricity of January 11, 1949, were repealed by the Law of Public Services of Electricity (LPSE).

According to Article 4 of the 1975 LPSE, the following activities were considered Public Service and therefore fall under the responsibility of the CFE:

a) Planning the national electricity system
b) The generation, transmission, transformation, distribution, and sale of electricity, and
c) Carrying out all works, installations, and tasks required for the planning, execution, operation, and maintenance of the national electricity system.

The reform to Article 27 and the enactment of the LPSE provided a sufficient foundation for establishing the state monopoly over the electricity industry. However, this would not be definitive. A modification to the activities considered public services would be enough to expand or reduce the CFE’s monopoly. In the years that followed, this would be key to reopening this sector of the economy to private investment.

Since the early 20^th century, the debate over energy reforms has focused primarily on the conflict between those who argue that a state monopoly ensures that all Mexicans have access to electricity and those who believe that private investment in specific areas of the industry’s value chain is essential to achieving that goal. More recently, the energy transition’s role has been incorporated into this debate. More than a century after the first power plant began operating in Mexico, these debates remain a constant throughout its history. In the last three decades, changes to the legal framework of the electricity industry have intensified. During this period, three major reforms to the legal framework have set the industry back: the legal reform of 1992, the constitutional and legal reform of 2013-2014, and the constitutional and legal reform of 2025.

The four major reforms of the electricity law in Mexico were driven by the constant battle between nationalist and liberalist presidential regimes, as discussed in the following sections.

The influence of the international context on the national electricity sector

The first major electricity legal reform resulted from international commitments Mexico assumed in the 1990’s. Mexico’s entry into the General Agreement on Tariffs and Trade (GATT) in 198614 and, later, the signing of a Free Trade Agreement with the United States and Canada (NAFTA)15 gave a definitive boost to the opening of the electricity industry. In the 1990s, various reforms to the 1975 LPSE began to open specific segments of the electricity industry’s value chain to private investment. Still, it was the constitutional reform of 2013 that established a free-competition regime in the country for activities in this industry that were not considered strategic.

In 1992, the Federal Congress passed a reform of the 1975 LPSE¹⁶, thereby opening opportunities for private investment in electricity generation not intended for public service17 . This reform did not have the objective of promoting energy transition but instead complied with the commitments Mexico assumed in the NAFTA negotiations. Under the reform, private parties were allowed to generate electricity through independent power production, self-supply, cogeneration, and small-scale production. Article 3 of the LPSE states:

¹¹ See Official Gazette of the Federation August 24, 1937.
¹² See Official Gazette of the Federation December 31, 1938.
¹³ (1960) Journal of the Debates of the Senate of the Republic.
¹⁴ (1986) Mexico signed the protocol of accession of mexico to the general agreement on tariffs and trade on July 25, 1986. This Protocol was approved by the Senate on September 11.
¹⁵ Mexico, Canada, and the United States signed NAFTA on December 17, 1992, and it came into force on January 1, 1994.
¹⁶ See Official Gazette of the Federation, December 23, 1992.

The following activities are not considered public service:
a) Electricity generation for self-supply, cogeneration, or small-scale production.
b) Electricity generation by independent power producers for sale to the Federal Electricity Commission (CFE).
c) Electricity generation for export, resulting from cogeneration, independent power production, and small-scale production.
d) The importation of electricity by individuals or legal entities, intended exclusively for their own use.
e) Electricity generation for emergency use resulting from interruptions in the public electricity service.
f) As a result of that reform, all mentioned activities would be carried out by private companies, as they were no longer considered public services.

In accordance with the above, the reform also modified Article 36 of the mentioned law. The reform to this provision empowered the Ministry of Energy to issue permits for self-generation, cogeneration, independent power production, and small-scale production. However, scholars argued that Article 3 of LSPE did not provide constitutional support and discouraged significant private investor participation in the electricity industry¹⁸ . A constitutional reform was imperative to give certainty to national and foreign corporations.

The unbundling of the electricity sector into strategic and non-strategic activities

The second major energy reform took place in 2013, when the Federal Congress and the thirty-two local congresses passed a constitutional amendment that modified the structure of the electricity industry. The constitutional reform amended articles 25, 27, and 28 of the Federal Constitution.

This amendment brought significant changes to the energy industry’s structure. First, it separated the various activities within the electricity industry’s value chain into strategic and non-strategic categories. Strategic activities, which include planning, control, transmission, and distribution, were reserved exclusively for the state monopoly. In contrast, generation and supply were considered non-strategic activities and are open to private investment. The Mexican state is responsible for developing the strategic activities through state-owned enterprises, and the Comisión Federal de Electricidad (CFE) was expected to adopt this new corporate structure. Additionally, the Energy Regulatory Commission served as a coordinated regulatory body for energy matters.

The main objectives of this reform were to open the energy sector to private investment and to address renewable energy. Transitory Articles 17, 18, and 19 of the corresponding reform decree provided the specific basis for a more significant role for clean energy within the energy mix¹⁹ .

As a result of this new constitutional basis, in 2014, the Federal Congress passed eight new laws and amended eleven others²⁰. Particularly, the Federal Congress approved the Geothermal Energy Law. However, it is essential to clarify that the transition to a lowcarbon economy had already been a concern of the legislator when the General Law on Climate Change (CCL) was approved in 2012, and that this concern was reaffirmed with the approval of the Energy Transition Law in 2015 (LTE)²¹ .

In this regard, one of the objectives of the CCL, as stated in its Article 2, is to promote the transition to a competitive, sustainable, and low-carbon economy that is resilient to extreme hydrometeorological events associated with climate change. Similarly, the 2015 ETL sought to promote a progressive increase in clean energy in the electricity sector. Furthermore, in the Second Transitory Article of the CCL, Mexico committed to reducing carbon emissions by 30% by 2020 and by 50% by 2050; while the Third Transitory Article of the ETL mandated that Mexico increase clean energy participation by 25% by 2018, 30% by 2021, and 35% by 2024.

¹⁷ The statement of reasons of this reform to the Law indicated that its objective was to allow private individuals to participate in the production process, generating electricity to be used exclusively for sale, for the entirety of their production, to the Federal Electricity Commission for the fulfillment of its purpose.
¹⁸ See Official Gazette of the Federation December 20, 2013.
¹⁹ Specifically, the Seventeenth Transitory Article of the Decree of this Constitutional Reform established that in the case of the electricity industry, the law on the matter would require participants in the electricity industry to acquire Clean Energy Certificates and to reduce polluting emissions, allowing the integration of new clean technologies into the energy matrix and established the gradual and programmed replacement of fossil fuel generation facilities with those that complied with stricter emission standards, among other things.
²⁰ The following laws were published in the Official Gazette of the Federation on August 11, 2014: Hydrocarbons Revenue Law; Electricity Industry Law; Geothermal Energy Law; Law of the Coordinating Regulatory Bodies in Energy Matters; Hydrocarbons Law; Mexican Petroleum Law and, Federal Electricity Commission Law.
²¹ González MJ (2017) New Mexican energy law (1st edn), Metropolitan Autonomous University, Mexico.

The energy policy transition described above began to yield results. According to the Clean Energy Progress Report for the first half of 2018, by the end of that period, clean energy generation had reached 23.4%, less than 2 percentage points below the clean energy generation target established by the ETL and the CCL²² . According to the 2020 Update to the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels, the clean technologies that showed the greatest growth were photovoltaics, wind power, and cogeneration. However, before the two transitions described above were consolidated, a third transition began in the energy sector. This new transition is part of the so-called 4T (Fourth Transformation), which, according to the government, constitutes a transformation of similar magnitude to Mexico’s independence from Spain in 182; the separation of Church and State in the 19^th century, and the Mexican Revolution of 1910.

The 4T established the recovery of energy sovereignty as a cornerstone of its government strategy, achieved through the restructuring and strengthening of public monopolies in the electricity and hydrocarbon industries (the Federal Electricity Commission (CFE) and Petróleos Mexicano’s (Pemex), respectively). However, as will be analysed later, the energy policy promoted by the 4T is not in accordance with Mexico’s international commitments or the current national energy constitutional framework. Furthermore, the 4T government blocked domestic private investment in the energy sector, leading the country back to a carbon-based economy and abandoning international commercial commitments under NAFTA, as well as GHG reduction targets. In the following section, we will analyse in detail what the 4T’s energy policy entails.

The turn back to nationalism. The Electricity industry and climate change in the 4-T times

The third major electricity-sector reform took place in 2024, when the Federal Congress and the thirty-two local congresses passed a new constitutional amendment to reverse the constitutional and legal reforms of 2013-14. This reform eliminated the separation of the electricity industry’s value chain into strategic and non-strategic activities. Instead, Article 27 of the Federal Constitution stated that the planning and control of the electricity sector, as well as the activities of electricity transmission and distribution, are considered public services, and that no private contracts or concessions may be granted in these areas, thereby modifying the structure of the electricity industry in Mexico. In addition to the above, the reform under discussion does not confer the character of public services on electricity generation and supply activities, nor does it leave them entirely open to private investment. The new constitutional text provided that “The laws shall determine the manner in which private individuals may participate in other activities of the electricity industry, which in no case shall have precedence over the public company of the State.”

In 2025, the Federal Congress passed the Electricity Sector Law, which repealed the EIL of 2014. The new law is similar to the LPSE 1975, but is better written and introduces some elements that can be useful for the energy transition, for example, it mentions energy storage for the first time.

In this regard, Article 12, Section VI of the ESL states, “The State must maintain at least fifty-four per cent of the average energy injected into the grid in a calendar year”. Thus, electricity generation is a semi-state monopoly because the private sector’s participation in these activities may never exceed that of the public sector.

With this constitutional reform, the plan to convert CFE into a state-owned productive enterprise is abandoned, reverting it to a decentralised agency of the federal government. Meanwhile, the CRE loses its autonomy.

The energy transition has not been prioritised within Mexican policy and legislation. The legal framework for clean energies is notably fragmented. Regulation of the energy transition is distributed among the General Law on Climate Change, the Planning and Energy Transition Law (PETL), the Biofuels Law, and the Geothermal Energy Law. The Electricity Sector Law (ESL) governs various stages of the clean energy value chain, as well as traditional energy sources.

Although the ELS does not directly regulate clean energy, its Second Section addresses electricity storage, which is a fundamental component of the energy transition. However, the four articles dedicated to electricity storage lack substantive regulatory provisions.

In that sense, Article 82 of the ESL states that the Ministry of Energy, through the Regulations and general administrative provisions, may establish the terms, conditions, and modalities under which Electrical Energy Storage Systems participate in the activities of the electricity sector, including the necessary permits and requirements. For its part, Article 83 empowers the National Energy Commission to establish and apply the methodologies for calculating the tariffs applicable to electricity storage. Article 84 mandates that the National Energy Commission include guidelines regarding electrical energy storage systems in the Market Rules and Operating Provisions.

Article 85 states that Energy Storage Systems installed by Market Participants and Permit Holders may provide energy and associated products to enhance operational flexibility. These contributions aim to improve the Accessibility, Reliability, Quality, Security, Efficiency, and Sustainability of the National Electric System, in accordance with the Market Rules. Additionally, the provision specifies that the same capacity or energy cannot be used for more than one service and must be fully offered to CENACE (Centro Nacional de Control de Energía) to ensure the efficient operation of the National Electric System.

²² Ministry of Energy (2026) Clean energy progress report: First half of 2018, Ministry of Energy, Mexico.

Although the Law’s regulations include a chapter on storage (articles 193 to 195), they do not provide comprehensive guidelines.

On the other hand, the PETL in its Article 1 establishes that one of its objectives is to strengthen the energy transition, the sustainable use of energy, compliance with clean energy obligations, and the reduction of polluting emissions. To this end, the law dedicates an entire section to the energy transition (Section Three, Articles 42 to 88). Although the law mentions emissions reduction several times, it does not include a specific, systematic chapter on the subject. The same is true regarding clean energy obligations: although the law establishes a National Institute of Electricity and Clean Energy and dedicates a chapter to regulating, in a very general way, some aspects of clean energy certificates, it remains essentially a grammatical and poorly drafted law. Even more. Article 26 establishes a rule that seems incompatible with the idea of energy transition. This precept states: “The Renewable Energy and other Clean Energy goals established in the Strategy must constitute minimum percentages of total electricity generation in Mexico.”

The Climate Change Law (CCL) is a programmatic measure focused solely on the use of clean energy and the transition away from combustion vehicles to help reduce pollutant emissions as part of climate change mitigation strategies. However, it does not specify any actions or obligations for either the government or individuals regarding these matters.

In contrast, the Biofuels Law is designed to promote energy diversification and sustainable development. It regulates and encourages the development and use of biomass as a sustainable biofuel, thereby reducing climate-polluting emissions.

The Mexican electricity industry is ruled by Articles 25, 27 and 28 of the Mexican Constitution, as amended in 1960, 2013 and 2024, the Electricity Sector Law of 2025 (ESL), the Planning and Energy Transition Law of 2025 (PETL), the Federal Electricity Commission Law of 2025 (LSPCFCE), the Climate Change Law of 2012 (CCL), the Geothermal Energy Law of 2014(GEL), the Biofuel Law of 2025 (BL), regulations of these laws issued by the Executive, and administrative regulations issued by the Ministry of Energy.

Among these administrative regulations, the Rules of the Market (RM) are particularly important. The RM governs the wholesale electricity market and comprises two documents: The Basis of Electricity Market (BEM) and the Operative Rules of the Market (ORM)²³.

The analysis of the currently enforced energy legislation shows that:
A. Although this legislation may seem new, it is not entirely so. Throughout its history, Mexican energy legislation and policy have often followed a cyclical pattern, which is causing Mexico to lose valuable time in its energy transition efforts.
B. Mexico is undergoing two transformations. The first concerns the dilemma of easements, and the second relates to renewable energy reforms to Mexico’s electricity legal framework.
C. Legislation on energy transition is fragmented.
D. Current legislation does not provide sufficient legal foundations for an energy transition policy in Mexico.

²³ In addition to establishing the procedures for conducting the wholesales transactions, the RM must establish the minimum requirements to be a market participant, determine the rights and obligations of market participants, define the way activities must be coordinated between transporters and distributors and define mechanisms for disputes resolution.