US business chamber slams Mexico electrical power law

The U.S. Chamber of Commerce says Mexico's attempts to limit private electricity generation would violate the U.S.-Mexico Canada trade agreement, known as the USMCA

Neil Herrington, the chamber’s Senior Vice President of the Americas, said in a statement that the bill could re-instate a government monopoly, adding “these changes would significantly raise the cost of electricity and limit access to clean energy for Mexico’s citizens.”

“Unfortunately, this move is the latest in a pattern of troubling decisions taken by the Government of Mexico that have undermined the confidence of foreign investors in the country," Herrington wrote.

Mexico vowed Thursday to forge ahead with the bill, even after Mexico's Supreme Court ruled against López Obrador’s previous attempt to block permits for renewable power plants.

Interior Secretary Olga Sánchez Cordero said the court ruling applied only to a 2020 executive order, and suggested the administration would wage a new court battle over another bill the president sent to Congress early this month.

The new bill would put cleaner, natural gas and renewable private plants — many built with foreign investment — last in line for electricity purchases. It is the latest chapter in a battle over private and renewable energy plants that were encouraged by López Obrador’s predecessors in order to reduce carbon emissions.

“This ruling involved the constitutionality of an (executive) order, and that is very different from a law,” Sánchez Cordero said. “So I think we have enough ammunition in common and constitutional law to go ahead, because I insist, we are not rejecting private investment in the energy field.”

With electricity use down during the pandemic, Mexico’s state-owned power company, the Federal Electricity Commission, faces declining revenue and increasing stocks of fuel oil it has to burn in power plants; the dirty fuel has lost customers worldwide. It has also come under pressure to buy coal from domestic mines.

López Obrador sought in an executive order in 2020 to shore up the government company by limiting permits to bring online other plants, including some wind and solar facilities, many of which are already built. The president claims that green-energy incentives give those plants an unfair advantage over the state utility.

But on Wednesday, the Supreme Court ruled that many of the provisions of the 2020 executive order would unfairly affect competition in the sector. Some of the rules had been put on hold previously. The case was brought by the government’s own anti-monopoly commission.

The first bill López Obrador sent to Congress this year would mandate that the first power to be used on national grids — which the commission oversees — would have to be from government plants, many of which burn coal or fuel oil.

Mexican business groups also say the proposed law would hurt investors, force Mexicans to buy more expensive electrical power, endanger Mexico’s commitments to reduce carbon emissions, and possibly cause disputes with foreign investors under the USMCA.

Sánchez Cordero defended the proposal, saying “a sector like electricity that is so strategic, involving national security, has to be under government stewardship. That does not mean that private firms cannot participate, within certain limits and rules.”

López Obrador is trying to fast-track the bill through Congress in 30 days. The president is known for his love of the oil industry and state-owned firms, and he has had a testy relationship with the private sector in his first two years in office.

Mexican industries have long been hobbled by the country’s relatively expensive and unreliable electricity supply. A 2013 legal overhaul opened the way for private companies, many of them foreign, to invest more heavily in the sector.