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Electricity generation and the wholesale power market in Mexico

Last verified: 2026-10-26 · Status: Changing

Private companies may build and own power plants in Mexico, but only within the Ministry of Energy's binding plan and with the State keeping a majority of generation through CFE. Plants of 0.7 MW or more need a generation permit from the National Energy Commission (CNE), which must decide within 60 business days, plus a separate interconnection contract and, before any works start, an approved energy social impact assessment. Sellers into the wholesale market are dispatched by CENACE, joint projects with CFE run for at most 30 years with CFE holding at least 54 percent in mixed investment, and fines for operating without a permit reach 10 percent of prior year gross income.

USD conversions use MXN 18.6638 per US dollar, the US Federal Reserve H.10 noon buying rate in New York for 23 October 2026 (FRED series DEXMXUS), the latest observation available when this page was verified. Legal conversions in Mexico use the Banxico FIX, which differs slightly. Conversions are for orientation only. Fines set in UMA use the 2026 daily UMA of MXN 117.31 published by INEGI in the DOF of 9 January 2026.

Key facts

Plant capacity from which a CNE generation permit is required	0.7 MWLSE art. 19, as of 2026-10-26 · in force
Maximum time for CNE or SENER to decide a permit or authorization	60 business daysReglamento LSE art. 25, as of 2026-10-26 · in force
Maximum time for SENER to decide the energy social impact assessment	90 calendar daysLSE art. 139, as of 2026-10-26 · in force
Minimum CFE stake in mixed investment generation projects	54 %LSE art. 40, section I, as of 2026-10-26 · in force
Maximum term of joint State and private generation projects	30 yearsReglamento LSE art. 73, as of 2026-10-26 · in force
Fine for generating without a permit	10 % of prior year gross incomeLSE art. 184, section I, item l), as of 2026-10-26 · in force
Time to sign the interconnection or connection contract once offered	10 business daysLSE art. 49, as of 2026-10-26 · in force

The rule

1. Three routes to generate, one permit regulator. Generation may be done by the State, by private parties alone or jointly with the State. The law recognizes three routes: distributed generation (below 0.7 MW), self supply (autoconsumo) and generation for the wholesale electricity market (Mercado Eléctrico Mayorista, MEM). Self supply and market plants need a generation permit from the National Energy Commission (CNE). Every plant of 0.7 MW or more must hold a valid generation permit; smaller plants are exempt generators, and backup plants used only in emergencies or outages need no permit at any size. Exporting or importing electricity needs a separate Ministry of Energy (SENER) authorization, and a plant built for export needs both.
Cost to do it: Permit fees are not quantified here because the Ley Federal de Derechos (art. 56) still refers to the former regulator and permit categories. Budget for the engineering, interconnection studies and legal work behind the application.
Example: A 0.6 MW rooftop solar array on a warehouse in Querétaro is an exempt generator and needs no CNE permit; expanding it to 0.8 MW makes it subject to the permit requirement. / The thresholds are in megawatts, not money: a 0.8 MW array needs a permit whether it costs USD 600,000 or USD 900,000.Ley del Sector Eléctrico (LSE), new law DOF 18 March 2025, in force 19 March 2025; Reglamento de la Ley del Sector Eléctrico, DOF 3 October 2025, LSE arts. 16 to 20; Reglamento arts. 19 and 24, 2025-03-18 official text · verified 2026-10-26 · changed: The LSE of 18 March 2025 repealed the Ley de la Industria Eléctrica of 11 August 2014 and moved generation permits from the former Energy Regulatory Commission (CRE) to the new CNE.

2. Binding planning and the State majority. SENER's planning of the power sector is binding. SENER publishes the Electricity Sector Development Plan every May, and transmission and distribution expansion programs, proposed by CENACE with CFE each February, look at least 15 years ahead. Private projects must fit this plan. The Constitution and the LSE keep planning and control of the national grid, and the public transmission and distribution service, exclusively with the Nation, so no concessions are granted for them.
Cost to do it: No fee. The cost is timing: a project outside the plan may not get interconnection capacity.
Example: A developer planning a 200 MW wind farm in Oaxaca checks the May plan and the transmission program to see whether the regional grid has expansion works scheduled before committing to land and turbines. / On a project of about USD 250 million, a plan mismatch can delay revenue by years, so the plan review comes before any capital commitment.Constitución Política, arts. 25, 27 sixth paragraph and 28, reformed DOF 31 October 2024; Ley del Sector Eléctrico (LSE), new law DOF 18 March 2025, in force 19 March 2025; Reglamento de la Ley del Sector Eléctrico, DOF 3 October 2025, LSE arts. 12 and 13; Reglamento art. 12, 2025-03-18 official text · verified 2026-10-26

3. Permit procedure and timeline. Applications go to the CNE (generation, storage, retail supply) or to SENER (imports, exports, social impact). The authority must decide within a maximum of 60 business days from receipt; it may grant with conditions or refuse when the project breaches the rules, endangers the reliability of the national system in CENACE's opinion, or the information is false. A substantive change to a pending application requires withdrawing it, filing a new one and paying the fees again. A permit does not give a right to interconnect; that is a separate process with CENACE.
Cost to do it: Expect parallel spending on the CENACE interconnection studies and guarantee deposits authorized by the CNE (LSE art. 49) while the permit is pending.
Example: An application filed on 2 March is due for decision about three months later once weekends and official holidays are excluded from the 60 business days. / No currency amount applies; the deadline is procedural.Reglamento de la Ley del Sector Eléctrico, DOF 3 October 2025, Reglamento arts. 19, 24 to 28, 2025-10-03 official text · verified 2026-10-26

4. Interconnection is decided by CENACE, not by the permit. CENACE defines the grid works each request needs, the order of priority among requests and joint studies by region. Holding a generation permit is never a criterion for priority. The applicant may build the required works at its own cost, ask that they be added to the expansion programs, or contribute to CFE as transmitter or distributor; there is no contribution when the applicant builds the works itself. The interconnection contract must be signed within 10 business days after it is offered. Connecting a plant without an interconnection contract is fined at 10 percent of prior year gross income.
Cost to do it: Grid reinforcement works or contributions are paid by the developer under CNE methodologies; guarantee deposits and periodic fees before commercial operation are authorized by the CNE.
Example: A 50 MW solar park in Sonora whose CENACE study requires a new 115 kV bay can build the bay itself to CFE specifications and then owes no contribution for it. / A substation bay can cost several million US dollars; building it directly avoids paying the same amount as a contribution.Ley del Sector Eléctrico (LSE), new law DOF 18 March 2025, in force 19 March 2025, LSE arts. 48 to 50 and 184, section I, item m), 2025-03-18 official text · verified 2026-10-26

5. Selling in the wholesale market. A plant that sells through the MEM must be represented by a generator market participant, present its interconnection contract, follow CENACE dispatch instructions and the Market Rules, coordinate maintenance with CENACE and notify planned retirements. Generators may sell their own output and associated products to suppliers and qualified users, but may not provide retail supply. Large consumers become qualified users by registering with the CNE if they meet the demand levels set by SENER, and may buy directly or through a qualified services supplier. Failing to make the offers required by art. 120 or manipulating prices is fined 128,000 to 514,000 UMA.
Cost to do it: Fine range for market offer breaches: MXN 15,015,680 (about USD 804,535) to MXN 60,297,340 (about USD 3,230,711) in 2026.
Example: A generator that withholds capacity from its CENACE offers faces a fine from MXN 15,015,680 to MXN 60,297,340, doubled for repeat offenses. / That is roughly USD 804,535 to USD 3,230,711 at the October 2026 rate.Ley del Sector Eléctrico (LSE), new law DOF 18 March 2025, in force 19 March 2025, LSE arts. 21 to 23, 35 to 37, 73 to 78, 120 and 184, section II, item d), 2025-03-18 official text · verified 2026-10-26

6. Joint projects with CFE. Plants developed jointly with the State must use one of two schemes and fit the binding plan. Long term production: the private party funds the plant, the State contributes no capital, all output goes to CFE under contract, CFE represents the plant in the market, and at the end CFE may take the assets at no cost; the plant cannot hold another permit or sell surplus to third parties. Mixed investment: CFE holds at least 54 percent of the project directly or indirectly, buys output preferentially and can market the rest as the plant's representative. The private partner must be a Mexican individual, company or trust domiciled in Mexico, and projects run for a fixed term long enough to recover the investment but never over 30 years.
Cost to do it: No statutory fee; partner selection follows guidelines issued by CFE's board and published in the DOF.
Example: In a 500 MW mixed investment combined cycle plant, CFE must hold at least 54 percent, so a private investor can hold at most 46 percent, for example MXN 4,600 million of a MXN 10,000 million equity base. / That private stake would be about USD 246,466,422 of an equity base of about USD 535,796,569.Ley del Sector Eléctrico (LSE), new law DOF 18 March 2025, in force 19 March 2025; Reglamento de la Ley del Sector Eléctrico, DOF 3 October 2025, LSE arts. 38 to 40; Reglamento arts. 71 to 74, 2025-10-03 official text · verified 2026-10-26

7. Energy social impact assessment before any works. Anyone developing electricity infrastructure must file an energy sector social impact assessment (Manifestación de Impacto Social del Sector Energético, MIS) with SENER, except plants that need no permit and minor changes without significant social impact. SENER must decide within 90 calendar days: approve, approve with conditions (30 business days to fix omissions), or deny. Work on project infrastructure may not start without the definitive approval. Holders must report on the social management plan yearly and keep project records for five years. Indigenous and Afro Mexican communities are consulted by SENER. Starting works without approval is fined 344,000 to 1,032,000 times the daily UMA and the permit must be denied; breaching approval conditions is fined 17,000 to 172,000 times the daily UMA.
Cost to do it: Starting works without MIS approval: MXN 40,354,640 (about USD 2,162,188) to MXN 121,063,920 (about USD 6,486,563). Breach of MIS conditions: MXN 1,994,270 (about USD 106,852) to MXN 20,177,320 (about USD 1,081,094).
Example: A developer that clears land for a 30 MW plant before SENER approves its MIS risks a fine of at least MXN 40,354,640 and losing the permit. / The minimum fine alone is about USD 2,162,188, more than the civil works budget of many mid size solar plants.Ley del Sector Eléctrico (LSE), new law DOF 18 March 2025, in force 19 March 2025, LSE arts. 135 to 141, 184 section I item g) and 186; transitory art. Décimo Segundo, 2025-03-18 official text · verified 2026-10-26

8. Old permits run to expiry but cannot be renewed. Permits, contracts and other instruments issued under the 1975 Public Electricity Service Law (including legacy self supply societies) and under the 2014 Electricity Industry Law stay in force on their original terms until they expire, and cannot be extended. Holders may migrate to the new routes; SENER must issue migration guidelines and run a one stop window. Members of legacy self supply or cogeneration societies may ask to exclude their load centers from the old permit, and legacy holders who want to sell in the MEM must migrate all their capacity. Applications filed before 19 March 2025 continue under the old rules unless withdrawn.
Cost to do it: No fee is set for migration in the law; the cost is renegotiating supply arrangements before the legacy permit ends.
Example: A legacy self supply society whose permit expires in 2030 has to plan migration or new supply contracts for its partner load centers before that date, because the permit will lapse without renewal. / No currency amount applies; the risk is loss of the supply arrangement at expiry.Ley del Sector Eléctrico (LSE), new law DOF 18 March 2025, in force 19 March 2025, LSE transitory arts. Quinto to Noveno and Décimo Primero, 2025-03-18 official text · verified 2026-10-26 · changed: Since 19 March 2025 legacy permits under the 1975 and 2014 laws can no longer be extended at expiry.

9. Penalties. The CNE imposes most fines; SENER imposes those tied to its own rules. Fines of 10 percent of prior year gross income apply to, among others, operating without a permit, connecting without an interconnection contract, starting construction without MIS approval and transferring or encumbering permit rights in breach of the law. Breaching permit conditions or market rules costs 128,000 to 514,000 UMA; individual supply breaches 26,000 to 128,000 UMA. Repeat offenders pay double and contumacious offenders triple, and a fine can never be lower than the harm caused.
Cost to do it: 2026 ranges: MXN 15,015,680 (about USD 804,535) to MXN 60,297,340 (about USD 3,230,711) for permit or market rule breaches; MXN 3,050,060 (about USD 163,421) to MXN 15,015,680 (about USD 804,535) for case by case supply breaches.
Example: A generator with MXN 800 million of gross income last year that operates a 5 MW plant without a permit faces a fine of MXN 80 million. / That is about USD 4,286,373.Ley del Sector Eléctrico (LSE), new law DOF 18 March 2025, in force 19 March 2025, LSE arts. 184 to 187, 2025-03-18 official text · verified 2026-10-26

Route	Size	Permit	Who buys the output	Rule
Distributed generation	Below 0.7 MW, on a distribution circuit	None (exempt generator)	Own use or sale through CFE as basic supplier under CNE contract models	LSE arts. 24 to 27
Isolated self supply	0.7 MW or more, not grid connected	CNE generation permit	Only the permit holder, on site	LSE arts. 30 and 31
Interconnected self supply	0.7 MW or more; simplified procedure for 0.7 to 20 MW	CNE generation permit and interconnection contract	Permit holder on site; surplus only to CFE or injected without payment	LSE arts. 30 and 32
Wholesale market generation	0.7 MW or more	CNE generation permit and interconnection contract	Market participants through CENACE dispatch	LSE arts. 35 to 37
Long term production with CFE	Any, within the binding plan	Contract with CFE	CFE only	LSE art. 39
Mixed investment with CFE	Any, within the binding plan	Contract with CFE; CFE at least 54 percent	CFE preferentially; rest marketed through CFE	LSE art. 40

Routes to generate electricity in Mexico, verified 26 October 2026 against the LSE and its regulation.

Worked example

A Spanish developer plans a 100 MW solar plant in Zacatecas selling into the wholesale market. It confirms the project fits the SENER plan, files the MIS (SENER decides within 90 calendar days), applies for the CNE generation permit (60 business days) and in parallel requests the CENACE interconnection study. If it cleared land before MIS approval, the fine would start at MXN 40,354,640 (about USD 2,162,188).
A Mexican manufacturer with a legacy 2014 law self supply permit expiring in 2029 cannot extend it. It can migrate to interconnected self supply under the LSE or register its plants as qualified users and buy from a qualified services supplier.

Step by step

1. Check the SENER Electricity Sector Development Plan (published each May) and the transmission and distribution expansion programs for the region.
2. Choose the route: distributed generation, self supply, wholesale market or a joint scheme with CFE.
3. Prepare and file the energy social impact assessment with SENER; do not start any works until it is approved (90 calendar days).
4. File the CNE generation permit application (decision within 60 business days) and, separately, the CENACE interconnection request.
5. Sign the interconnection contract within 10 business days of the offer and post the guarantees authorized by the CNE.
6. Register a market participant (or appoint a representative), then operate under CENACE instructions and file the yearly social management plan report.

Common traps

Treating the CNE permit as grid access. Interconnection priority never depends on having a permit (LSE art. 49).
Starting earthworks before the social impact approval: fines from 344,000 times the daily UMA and denial of the permit (LSE art. 186).
Assuming a legacy permit can be renewed. Permits under the 1975 and 2014 laws end at expiry (LSE transitory arts. Quinto and Noveno).
Amending a pending application substantively without withdrawing it; the authority keeps evaluating the original filing (Reglamento art. 26).
Selling surplus from an interconnected self supply plant to anyone other than CFE (LSE art. 32).

Sources

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