Study on legal and regulatory factors affecting cross-border trade in electricity between Mexico and the United States -- final report

This report analyzes the evolving legal and regulatory frameworks of the Mexican and U.S. power sectors and the likely impact of these frameworks on the cross-border trade in electricity between Mexico and the United States. To provide context for the discussion of specific issues, Part II describes electricity sector restructuring developments in the United States. After a brief overview of the regional electricity market, this part examines current restructuring efforts in the United States and, to place the latter in perspective, in several other countries currently undertaking restructuring. Part III focuses on opportunities for cross-border trade and investment. This section first identifies a range of regulatory, legal, technical, and economic factors on both sides of the border that will affect trade and investment, and then examines a set of cross-border trade and investment options and develops a scenario analysis methodology that incorporates many of the issues detailed in the first section. A key conclusion is the significant potential for gains available from increased coordination and integration of the Mexican and U.S. power systems, which have already yielded substantial benefits for each country. In order to realize these benefits, investments in transmission, generation, and system coordination will likely be necessary. In the case of transmission, the viability of a specific project will depend heavily on factors such as the loads and resources in each region and the resulting market price of power, the terrain over which the line is routed, and the need for DC converters. In the case of generation, the factors determining the viability of a specific project will include loads and resources in the region, fuel prices, and technological developments. The report also finds that many important cross-border issues have not been resolved by the regulatory bodies and/or courts in Mexico and the United States. Ongoing regulatory and legislative changes in both countries will affect the attractiveness of cross-border trade and investment opportunities. Market participants and official agencies should continue to monitor these developments closely. Includes a glossary of electricity industry restructuring terms.