Mexico's Energy Reform: A Return to State Control

In November 2024, Mexico approved a constitutional reform aimed at modernizing the energy sector by conferring on the Mexican state the responsibility for the transition to renewable energy sources. This reform was part of a broader effort to reinforce state control over key sectors and ensure energy sovereignty.

In a significant legislative move, Mexico's Congress has approved a comprehensive energy reform bill aimed at reasserting state control over the electricity sector. This reform marks a pivotal shift from the 2013 energy reform, which had opened the sector to private and foreign investments.

The newly passed legislation and its secondary energy laws, which entered into force on March 19, 2025, enshrines the Federal Electricity Commission (CFE) and Petróleos Mexicanos (Pemex) as “Public State Companies” (Empresa Pública del Estado), reversing their previous status as “Productive State Company” (Empresa Productiva del Estado).  This change in CFE and Pemex’s legal status implies that their function is driven to fulfil a social function rather than merely profit-making. The reform also mandates that the CFE will generate and supply at least 54% of the country's electricity, with private companies sharing the remaining 46%.

Additionally, the reform includes the following key provisions:

• State Dominance: The Mexican state, through the CFE, will have a constitutional right to dominate the electricity sector. The CFE will take dispatch precedence over all private sector participation.
• Private Sector Participation: While limited, private and foreign companies will still play a role in meeting Mexico's energy demands and transitioning to cleaner energy sources. Pemex will have more freedom and preferable conditions to collaborate with private companies in various investment schemes, including mixed participation contracts.
• Regulatory Changes within the Public State Companies: The CFE will no longer operate through independent subsidiaries, and strict separation rules for private sector participants will remain.
• Regulatory Changes within the market regulators: The Energy Regulatory Commission (CRE) and National Hydrocarbons Commission (CNH) will be dissolved and integrated into the government's Energy Ministry (SENER).Consequently, the Executive Branch –instead of the previous independent regulators– will control the issuance and revocation of permits, the supervision and enforcement of sanctions, and the issuance of new regulations applicable to power, oil and gas activities.

The reform is expected to have far-reaching implications for Mexico's energy landscape. By prioritizing state control, the government aims to ensure energy sovereignty and security. Private investment in the energy sector is not prohibited or cancelled. However, the limitations on its participation have raised concerns about potential impacts on investment and market competitiveness. Investor uncertainty has been further exacerbated by the dissolution of autonomous regulatory bodies (such as CRE and CNH), which may deter foreign investment.

As Mexico navigates this significant policy shift, stakeholders will need to closely monitor the implementation of the new laws and their impact on the energy sector. The reform underscores the government's commitment to reversing previous policies and reasserting state control, setting the stage for a new era in Mexico's energy sector.