The Electricity Industry Law (LIE), published in 2015 to vertically disintegrate the Federal Electricity Commission (CFE) and implement an energy market in which the only activity reserved for the State was energy transmission (although third parties could be contracted for the construction of infrastructure), was modified in 2021 to strengthen the state electricity company over the private ones. The changes, which passed through indications of unconstitutionality dismissed by the Supreme Court, are today suspended by the protection of a court, pending the review and sentence of the Collegiate. Meanwhile, everyone loses, particularly the country’s legal certainty, specialists said.
The changes to the LIE that the president Andres Manuel Lopez Obrador sent in February 2021 as a preferential initiative that was approved by both chambers in a few weeks, included the modification to eight articles and four transitory ones, which in content highlight the modification to the dispatch order that would force the National Center for Energy Control (Cenace) that as manager of the network now I would not weigh the use of cheaper energy per node, but in the first place the energy from the CFE’s hydroelectric plants, followed by that generated in other plants of the state company, the wind power (from private to exchange between them or sale to the CFE) and finally the combined cycles of the CFE, leaving the other renewables, such as solar, to private.
Regarding the granting of generation permits, which are now issued by the Energy Regulatory Commission (CRE) as an obligation (like a driver’s license, which everyone in Mexico has the right to obtain if requested), they will now be subject to criteria of network planning and may be denied.
The regulator will also be forced to revoke permits “obtained by carrying out acts constituting fraud against the law”, and the government will be forced to review the profitability and continuity of the contracts of independent power producers (PIE) that sell to the CFE.
The shelters
Then, more than 250 companies protected themselves and the entry into force of the new LIE was suspended. Then the Federal Commission of Economic Competition, on the one hand, filed a constitutional controversy before the Court on the grounds that its powers were being violated; the opposition to the majority of Morena and his allies at the time among the deputies, in addition to state governments, also filed actions of unconstitutionality, considering that the changes stopped the development of the country.
The unconstitutionality obtained the vote of five ministers, and although the majority, six, defended it, they were not the qualified number that was required for this change, so this resource was discarded. But a few weeks ago, the district court specialized in economic competition again granted a suspension to the act, now of a general nature, which applies not only to those who took refuge but to all those involved, until the sentence.
According to the expert in energy law, Miriam Grunstein, it seems that the battle has been won by the companies, but without the collegiate vote nothing is final.
“What wins is the legal insecurity in the country,” said the specialist, “it will be the times of the judiciary that define the route, but to repeal the changes, another reform to the reformed articles in Congress would be needed, the president It would be a piece of paper and although it would be good for investors, it would be a reiteration that institutionally we are in pieces, which speaks very badly of the country’s governance and rules.”
While for Víctor Ramírez Cabrera, of the Mexico Climate and Energy PlatformIn fact, the reform is not serving the government at all because it is not being applied, but it is generating a regulatory impasse.
“Whoever benefits is at least efficient, which is the CFE that continues to operate with plants that due to economic merit should stop operating,” he said, although he acknowledged that many companies that continued in the legacy regime of self-supply (with alleged partners who are actually clients that provoke accusations of illegality from the government), have migrated to the wholesale market.
There is the possibility of an easy way out that would be convenient for the Executive: the changes to this Law can be repealed and thus reach the negotiation on the consultations to the T-MEC violations with the first point for which the US government accuses the Mexican of obstructing the operations of its companies in the country, which would facilitate negotiations before reaching an international panel. But nothing is certain yet, said Ramírez Cabrera.
