The Parties shall allow state enterprises to negotiate performance clauses in their service contracts.
5. Electricity
(a) In Mexico the supply of electricity as a public service is a strategic area reserved to the State. Except as provided in subparagraph (b) below the activities encompassed by the supply of electricity as a public service in Mexico include the generation, transmission, transformation, distribution and sale of electricity.
(b) The opportunities for private investment in Mexico in electricity generating facilities include:
(i) Production for Own Use
Enterprises of the other Parties may acquire, establish, and/or operate an electrical generating facility to meet its own supply needs. Electricity generated in excess of the enterprise's own supply requirements must be sold to CFE and CFE shall purchase such electricity under terms and conditions agreed to by CFE and the enterprise.
(ii) Co-generation
Enterprises of the other Parties may acquire, establish, and/or operate co-generation facilities which generate electricity using heat, steam or other energy sources associated with an industrial process. Owners of the industrial facility need not be the owners of the co-generating facility. Electricity generated in excess of the enterprise's own supply requirements must be sold to CFE and CFE shall purchase such electricity under terms and conditions agreed to by CFE and the enterprise.
(iii) Independent Power Production
Enterprises of the other Parties may acquire, establish, and/or operate electricity generating facilities for independent power production (IPP) in Mexico. Electricity generated by IPP facilities for sale in Mexico shall be sold to CFE and CFE shall purchase such electricity under terms and conditions agreed to by CFE and the enterprise. Where an IPP located in Mexico and an electric utility of another Party consider that cross- border trade in electricity may be in their interest, the Parties agree that these entities and CFE shall have the right to negotiate the terms and conditions of power purchase and power sale contracts. The modalities of implementing such supply arrangements is left to the end-users, suppliers and CFE and may take the form of individual contracts between the state enterprise and each of the other entities. Such contracts shall be subject to regulatory approval.