The controversial electricity reform of López Obrador borders on victory in the courts

The electricity proposal of President Andrés Manuel López Obrador, which gives preference to the plants of the parastatal Federal Electricity Commission (CFE), received a push forward on Thursday, when a Collegiate Court Specialized in Economic Competition ruled against the suspensions that they held back its application. This is an advance for the Federal Administration, which seeks to undo the principles of open market and competition that were passed in the energy reform of the previous administration. However, it is not a definitive victory, experts agree, and it may have the effect of further delaying private investment in the sector.

In March, the Senate approved amendments to the Electricity Industry Law (LIE) that reversed the principle of economic dispatch that ruled that the cheapest plants, generally private renewable energy plants, were the first to upload electricity to the grid.

López Obrador proposed to reverse this, giving priority to the CFE plants, whether they are clean energy or not.

This includes public thermal power plants that run on fuel oil, a highly polluting derivative of oil.

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A second proposed modification eliminates the obligation to hold auctions, a mechanism by which the CFE contracted energy at a low price. During the previous government, renewable energy auctions reached world record prices, which, the government hoped, would translate into investment from renewables companies with foreign capital. The modification of López Obrador opens the door to review contracts already signed and the revocation of self-supply permits, widely used by companies to supply electricity from private sources.

Power generating companies presented hundreds of appeals against the modifications to the LIE days after the Senate passed in March, which temporarily paralyzed the implementation of the proposal. Thursday's ruling is an advance for the president, but it does not mean that the LIE will take effect immediately, explains Julia González, a lawyer specializing in regulatory compliance in the energy sector at the González Calvillo firm in Mexico City, since they are hundreds of procedures that have to be done before. "This is an alarm signal," says González, "because it could be the case that all the suspensions are revoked." In addition to the injunctions, the Federal Economic Competition Commission and the opposition parties appealed the changes to the Supreme Court, which has yet to rule.

López Obrador has made the energy agenda a central axis of his political project. Not only did he obtain approval of his proposals for the LIE in March, but in April he proposed changes in the hydrocarbons sector in order to return control of the market to the parastatal Petróleos Mexicanos (Pemex). The plan has already had repercussions by sowing uncertainty about the future and discouraging investment.

"The reality we are wasting time, and this will only cause no one to want to invest in Mexico in the electricity sector," says Ramsés Pech, an independent analyst of the Mexican energy sector, "and this would mean that no one will have the confidence to enter tenders to CFE, because the laws can be modified, and cause litigation ”. Last week, a US gas trading company announced that it entered into arbitration proceedings against CFE because the state company has not paid it.

The world is moving fast, and we will be submerged in uncertainty by not agreeing, ”says Pech.

The expert assures that the Ministry of Energy will not comply with the established quota of clean energy for 2024 “knowing that Europe is implementing public policies, and the United States yesterday presented a bill to have access to clean energy and invest in infrastructure ”.

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