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In order to define the final rates for Basic Supply that allow the transmission of the Wholesale Electricity Market, several provisions have been published including the justification to determine the charges for: (i) transmission; (ii) distribution; (iii) operation of the National Energy Control Center ("CENACE"); (iv) electricity and Associated Products; (v) operation of CFE's Basic Supply; (vi) authorizations of specific rates by the Ministry of Finance and Public Credit ("SHCP").

On November 23, 2017, the Energy Regulatory Commission (the "CRE"), published the methodology for adjusting the final rates of the Basic Supply (the "Methodology") that will be used from December 2017 to December 2018 in order to determine the value of the electricity rates applicable to persons or entities that are not Qualified Users.

All power consumers who choose to remain in the Basic Supply or those that can not be registered as Qualified Users, are subject to such rates, classified by categories and divisions.

The (17) divisions are:

table 1 eng

The (12) categories are:

table 2 eng

The charge for transmission is covered by all these users, depending on whether they are in a voltage greater or equal than 220 kV or, if they are under 220 kV, in accordance with the provisions of the CRE for transmission rates.

Likewise, the distribution charge is applied to users of medium and low voltage, depending on whether it is possible to differentiate between their power capacity of power consumption; or it is applied a demand charge, in accordance with the provisions of the CRE for distribution rates.

The CENACE operation charge is applied to all users through a certain amount that depends on the level of consumption of each Load Center (kWh), in accordance with the applicable provisions issued by the CRE.

At the same time, the fixed charge for operation by Basic Supply (CFE Suministro Basico) for 2018 will range between MXN 38.27 and MXN 2,779.86 pesos-month (to be updated and published by CRE according to certain transitory monthly adjustments), which depend on the division and specific category to which each user belongs.

Additionally, the charge for Related Services not included in the Wholesale Electricity Market will be of MXN 0.0054 pesos/kWh.

The charge for electricity and capacity is a variable component that takes into account the basis, intermediate, semi-peak and peak periods depending of the specific division and category, assigning references to consumption and/or demand, as well as load profiles and the Locational Marginal Price.

The Methodology defines fixed charges (per user) and variables (per capacity and generation), which reflect the nature of the cost in each component and the consumption and measurement characteristics of each user, which are described as follows:

Also, President Enrique Peña Nieto published on November 30, 2017 the Administrative Provisions authorizing SHCP to establish a mechanism for setting the final electricity rates of Basic Supply, in order to determine a rate setting mechanism different from the one determined by CRE that was for certain groups of Basic Supply Users. This Provisions aims to allow the access of electricity will contribute to specific sectors and their economy.

Therefore, on November 30, 2017, the SHCP published:

1.The Administrative Provisions authorizing the final rates of electricity for Basic Supply and domestic users (in low voltage and who are not considered DAC), reestablishing the classifications of domestic users 1, 1A, 1B, 1C, 1D, 1E, 1F and DAC and defining the seasonal consumption thresholds (summer and other seasons) in basic, intermediate (low and high for certain classifications), surplus and minimum consumption, applicable to CFE Basic Supply.

2.The Administrative Provisions that authorize the final rates of Basic Supply of 9-CU and 9-N, restoring the 9-CU rate for the pumping of water for agricultural irrigation with a single charge and the rate 9-N nocturnal, whose objective is to specify prices and rates of stimulus for energy quotas. These quotas shall consider the economic and social conditions prevailing in the sector, based on specifications of fixed charge per kWh, surplus energy, tension, supply capacity, contracted demand and time period (day and night).

3.The Administrative Provisions that authorize the final rates for Basic Supply of aquaculture in order to stimulate agricultural energy and taking into account the economic and social conditions prevailing in that sector. As well, with a 50% discount on the Methodology, the criteria set forth is to benefit aquaculture producers managed by the Ministry of Agriculture.

Basic Supply Users that were not included in the authorizations of specific rates by the SHCP, could have significant variations in their final energy costs. It will depend on the division and the category to which they belong, so they need to become acquainted with the regulatory, legal and economic alternatives that allow them to make the correct decisions of Power Supply.

Our Firm will be happy to answer any question about this alert.

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