This law deals with all aspects of electric energy for public service, including generation, transmission, distribution, transformation and supply. The law establishes that public electricity service is of the exclusive competence of the Mexican State, through the national electricity companies, and must be provided on a least-cost basis. It regulates the obligations of competent institutions and sets penalties for non-compliance.
This law was reformed in the period 1992-1994, to allow participation of private entities in the process of electricity generation, excluded from the definition of "public service" included the following: self-supply of electricity, co-generation (production of electricity from waste heat for self-supply), small electricity production (under 30 MW for sale to the national electric utility CFE), and independent power production for exclusive sale to CFE. Rules and regulations for these new forms of the electricity business are contained in Articles 36 and 36 Bis of this law (in june of 2011 the 36 Bis was reformed where CFE have to considered for the public service the enviromental externalities for each technology). Renewables that otherwise would not compete for public service on a least costs basis, are now finding niches of application under the new categories, especially for self-supply.
Over 4,000 MW in permits for wind farms, solar, small hydro and biogas-to-electricity projects have been awarded by the Energy Regulatory Commission.