How Mexico's Businesses Can Avoid Penalties from New Codigo de Red Regulations

Beginning April 9, all electricity customers in Mexico will need to comply with the Codigo de Red, a new regulatory framework that aims to improve the reliability, quality, security, and sustainability of Mexico’s electric grid.

Fines for non-compliance can be significant, and many customers are now wondering what exactly the regulation entails and what they need to do to comply.

And so, in the second part of our ongoing series on the risks and opportunities in Mexico’s recently liberalized energy market, we sat down with Julian Gibson, Senior Energy Advisor for Enel X North America, to discuss the Codigo de Red and what it means for end-use customers.

Read our previous article, Why Mexico’s Utility Rates Are Likely to Continue Rising (And What Customers Can Do About It)

Q: What is the Codigo de Red, and why was it implemented?

Tasked with regulating Mexico’s new competitive energy markets and ensuring efficiency and reliability, the Comisión Reguladora de Energía (CRE) implemented a Network Code known as the Codigo de Red. The new policy outlines the technical requirements for all customers that use the National Electric System (SEN). There are several principles that guide the Codigo de Red, but the main implication for end-use customers is that the policy serves to modernize infrastructure and they will need to demonstrate technical compliance to the CRE. The penalties are meant to drive the country’s biggest energy consumers to help improve the efficiency of the system by installing more efficient equipment in their facilities.

Q: So then, how exactly are end-use customers impacted by the Codigo de Red?

All electricity customers in Mexico, whether they participate in the competitive market or remain on the CFE tariff, will need to demonstrate to the CRE that that their electrical equipment meets modern standards. The requirements under the Codigo de Red are specific to power factor, current distortions, voltage variations, electrical impedance, metering and telemetry, and IT requirements. Customers that do not meet the standards established by the Codigo de Red will need equipment upgrades.

Q: What do customers need to do to abide by the Codigo de Red, and what are the penalties for non-compliance?

In the immediate term, customers will need to demonstrate active engagement in compliance efforts. This means conducting engineering studies to identify the structural and equipment adjustments that they’ll need to make to meet individual standards around power factor, current distortions, metering requirements, and other things.

The regulations stipulate a number of different penalties, and the level of non-compliance will influence specific sanctions. The legislation, however, allows for fines up to 10% of a company’s gross revenue, or roughly $20M Pesos ($1.1M USD).

Q: What is Enel X doing to help our customers in Mexico meet Codigo de Red requirements?

For some of our customers, adapting to these changes can be complex. Enel X can facilitate engagement with engineering firms offering services related to Codigo de Red and can perform vendor due-diligence to help our customers find the right service providers to bring them into compliance. Enel X also helps with project management and managing communications and deadlines during project implementation.

To discuss options for your organization, talk to one of our experts today.

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Authored By Charles Benisch

Charles is the marketing manager for energy procurement services at Enel X.

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