U.S. and Mexico Sign Bilateral Agreement to Promote Stability of Interconnected Power Grid

On January 7, 2017, the United States Department of Energy (DOE), the Federal Energy Regulatory Commission (FERC) and Mexico's Ministry of Energy (SENER), the Energy Regulatory Commission (CRE) and the National Center for Energy Control (CENACE) signed the high-level, nonbinding bilateral "Principles to Promote the Reliability and Security of the Interconnected Power Systems of the United States of America and the United Mexican States" with the stated objective of promoting growing cross-border electricity-related operations and increasingly interconnected U.S.-Mexican electricity grids. 

Through this framework agreement, the U.S. and Mexico agree to:

• address events and identifiable risks affecting the power grid and improve the reliability of the U.S.-Mexico interconnected electric power system;
• promote the reliable performance of the electric power system without undue preferences or discrimination;
• apply current knowledge and resources to promote the continuous improvement of reliable operations of both countries' interconnected electric power systems; 
• cooperate when a cross-border reliability event occurs and ensure the causes are understood and mitigated; and
• coordinate to ensure the consistency necessary to support reliable operation while observing sovereign jurisdictions with individual policy and regulatory mandates.

The framework agreement aims to build the kind of mutually beneficial relationship and cross-border electricity market that the U.S. already has with Canada, and it is welcomed by both sides, especially in light of the recent increased development of renewable resources in Baja California and Mexico's increased reliance on imports of U.S. natural gas to run cleaner power plants. This framework agreement follows the agreement reached between U.S. President Barack Obama, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau in June 2016, laying out the neighboring countries' objective of producing 50% of their electric energy through renewable energy sources by 2025 (a figure which represents a 37% increment from actual production levels).

This agreement represents a first step in a likely increase in electricity from renewable energy sources flowing north and natural gas flowing south. It was preceded by a June 2015 Memorandum of Understanding between the U.S. Federal Energy Regulatory Commission ("FERC") and Mexico's Comisión Reguladora de Energía ("CRE"), which laid the groundwork for increased information sharing and cross-border collaboration on regulatory experiences and practices.

At this time there is uncertainty regarding the future status of the framework agreement due to the Trump administration's announced intentions on NAFTA and its actions on border security. Orrick will continue to monitor and provide updates as to its progress.