Mexico’s top court is redoing the president’s plans for the state-owned electricity company

It could also establish a confrontation between the court and the president, a nationalist trying to reverse the key parts of a historic overhaul of the energy sector under his predecessor, which ended the Mexican state’s monopoly on the oil market and opened up electricity markets. investment.

Mexican courts appear to be an obstacle to Mr. Lopez Obrador’s desire to centralize power, analysts say. A number of lower court decisions have been taken against the government in the energy sector, and the Supreme Court has stopped the government from reducing the salaries of senior officials in autonomous institutions, such as the central bank.

Wednesday’s ruling, by a 4-1 vote, eliminates key aspects of a policy released last year by the Ministry of Energy, which calls on the national grid operator to take electricity produced by CFE before cheaper options from private generators that have invested billions of dollars in the country, especially in wind and solar stations. The ministry said the change was necessary to ensure the reliability of the network.

The policy was challenged in the Supreme Court by the country’s antitrust commission on the grounds that it violated the constitutional principles of free competition and market access.

“The feeling that this court decision leaves us with is that, in one way or another, there is still a good system of checks and balances,” said Rodolfo Rueda, senior advisor at Thompson & Knight LLP, which focuses on energy projects in Latin America .

The ruling comes two days after Mr López Obrador sent a bill to Congress to amend electricity laws that would further limit competition in the electricity sector in favor of CFE and jeopardize billions of dollars in private investment.

Analysts said the ruling makes it much more likely that the bill, if passed into law, will also be overturned.

“The bill is much more aggressive against the rights of private investors than the reliability policy, so this is an unmistakable indication that the reforms proposed in the bill would be unconstitutional,” said Pablo Zárate, CEO of FTI Consulting in Mexico.,

a global consulting firm.

Currently, the law requires the use of the cheapest electricity first and the most expensive energy last, with the idea that savings can be passed on to consumers. The rules have favored private sector wind and solar power generators over many of the older, higher-cost CFE power plants.

Under the proposed changes, hydropower would be the first energy placed on the grid, followed by any energy generated by CFE, electricity from independent contracted energy producers to CFE, then private solar and wind energy and, finally, other private power plants.

CFE, which has enjoyed a monopoly for many decades, has large hydropower plants, a nuclear power plant and plants that run on natural gas, coal and fuel oil, but little in terms of solar and wind energy.

The proposal also allows regulators to revoke permits for private generators that have built power plants under a 1992 law that allows companies to generate electricity for their own use and requires them to apply for permits under the current law.

Mexico’s largest business organization called the bill an “indirect expropriation” and said it violated the constitution. He added that the bill also opposes international trade, investment and environmental protection agreements.

The bill is backed by Morena’s ruling legislators, who have a majority in the lower house of Congress and the Senate.

Last month, U.S. Secretaries of State, Energy and Trade sent a letter to Mexican counterparts saying the López Obrador administration could violate the US-Mexico-Canada trade pact if regulators block private companies’ permits in favor of the Mexican state. .

“While respecting Mexico’s sovereign right to determine its own energy policies, we are obliged to insist that Mexico comply with its US obligations,” they said.

—Santiago Pérez contributed to this article.

Write to Anthony Harrup at [email protected]