CFE, Fisterra complete Mexico’s first electricity hedge

CFE Calificados, the qualified supplier subsidiary of Mexico’s state power utility CFE, has completed the first hedge contract for the country’s power market with Frontera Mexico Generacion, a subsidiary of power generator Fisterra Energy.

The hedge contract, known as a Transaccion Bilateral Financiera (TBFin), was completed over the week ended 19 November and allows CFE Calificados to comply with the rules of Mexico’s new deregulated power market, obliging qualified suppliers to acquire a minimum of 60% of their contracted energy and capacity requirements from a generator for the coming three years.

The transaction, which has been reported to Mexico’s power market operator CENACE, allows the companies to fix the price of energy on a bilateral basis, sources told ICIS.

The three-year TBFin contract between CFE and Fisterra covers the guaranteed delivery of a fixed volume of electricity in MW per hour. Effectively, Frontera has locked in the cost of the power it sells to CFE Calificados for the next three years.

The exact volume of power and capacity covered by the contract could not be confirmed by ICIS prior to publication.

The issuing node covered in the contract is the Reynosa node, the point of injection for the Frontera plant which although located in Texas is fully connected to Mexico’s SIN power grid. The purchasing node where CFE will receive the power has not been reported.

A complementary contract for the provision of capacity (potencia) has also been established by CRE, which is known as a Transaccion Bilateral Potencia (TBPot).

Rules for both contracts will be formally outlined in the CRE’s bilateral transaction and power coverage contracts registry manual, which has yet to be published.

Requirements

Legislation passed by Mexico’s energy regulator CRE earlier this year outlined the contractual requirements for power suppliers on both the regulated and deregulated markets.

According to the legislation, suppliers to both markets will have to submit an 18-year outlook to CRE annually, estimating their energy, capacity and clean energy certificate (CEL) requirements for each year based on the maximum consumption needs of each client covered under existing supply contracts.

Qualified suppliers will then have to provide contractual coverage for 60% of their power, capacity and CELs for the first three years of the outlook. The contractual coverage minimum then falls to between 20% and 50% for outlook years 4-18.

On the regulated market, service providers will have to submit documentation proving that they have contracts covering 60% of their power contracts and 80% of their capacity and CEL requirements by the end of this year for the 2017-2019 period. This will then rise to 79% of power contracts and 85% of capacity and CEL requirements by the end of 2017 for the 2018-2020 period, and 90% and 100% across the following three-year periods respectively.

Beyond the initial three-year period, regulated market service providers will also have to provide proof of coverage for figures varying between 30-90% of their power, capacity and CEL requirements. james.fowler@icis.com