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Mexico Seeks Waivers to Make Changes to Its U.S. Gas Supply Process

With energy reform taking effect in Mexico, two state-owned energy entities have filed a joint petition with FERC, asking it to grant temporary waivers of its capacity release regulations and tariff provisions so the two can reorganize their U.S. natural gas procurement process.

Mexico's state-owned electric utility, Comision Federal de Electricidad (CFE), filed a request with the Federal Energy Regulatory Commission on Monday [No. RP14-1252]. Mex Gas Supply SL -- formerly known as MGI Supply Ltd., and an indirect subsidiary of national oil and gas company Petroleos Mexicanos (Pemex) -- was also a petitioner.

According to the filing, the waivers "are designed to enable Mex Gas to exit its CFE supply business in the U.S. in an orderly and efficient manner through the transfer of a package of assets that includes several El Paso service agreements to CFE," the organization that runs Mexico’s power generation and distribution. The petitioners asked FERC to expedite their request, to issue an order granting the waivers by Sept. 30 or soon afterward, and for the waivers to be in effect for 120 days.

CFE has historically relied on Mex Gas to procure natural gas in the U.S. for export to Mexico, which the utility subsequently used at its gas-fired power plants in northern Mexico. But as part of Mexico's energy reforms (see Daily GPI,Aug. 14), CFE and Mex Gas reached an agreement for the former to take over the responsibility of purchasing the U.S. gas it needs. The deal also called for the transfer of a package of assets from Mex Gas to CFE.

Specifically, agreements for transportation service on the interstate gas pipeline system of El Paso Natural Gas Co. LLC. would be transferred from Mex Gas to CFE. According to the filing, all of the El Paso transportation service agreements are either short-term -- of one year or less, but more than 31 days remaining on the primary term -- or provide service at a discounted rate.

"Under [FERC's] capacity release rules, transferring the agreements through the use of permanent capacity releases would require that the agreements be posted for bid by El Paso," the filing said, adding that following such a course "would permit other parties to bid for the capacity that is to be transferred, which could prevent the transfers from occurring or cause the transfers to occur at different rates than originally contracted for by Mex Gas.

"Moreover, transferring the El Paso capacity as part of an integrated package would be facially inconsistent with the Commission's prohibition on tying arrangements in the context of capacity release."

Last month, Mexico's Congress of the Union approved legislation opening the country's energy sector to private investment (see Daily GPI,Aug. 7). Mexican President Enrique Pena Nieto signed the legislation into law.

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