The Supreme Court of Mexico ruled against proposed changes to how the country's electricity market is regulated, saying they would prioritize the state utility over private companies, which was unconstitutional.
The Wall Street Journal reports that the ruling would set back efforts by President Andres Manuel Lopez Obrador to give more power to state-owned companies such as utility CFE and oil giant Pemex.
The Mexican Energy Ministry last year published a policy that required the grid operator of the country to buy electricity from CFE before it buys from private companies, many of which had invested in solar and wind generation capacity. The ministry's argument was that prioritizing electricity from CFE ensured the reliability of the grid, but Mexico's antitrust regulator disagreed and took the case to the Supreme Court.
"The feeling that this decision of the court leaves us with is that one way or another, there is still a good system of checks and balances," a senior counsel with law firm Thompson & Knight told the Wall Street Journal.
Private power companies that had invested billions in new generation capacity took the government to court in 2019 after it allowed CFE to get clean energy credits for old power generation capacity. The companies argued that this reduced the value of their investments and changed the rules under which these investments were made.
Now, the Supreme Court ruling threatens this rule-change proposal by the Obrador government: the Mexican President just sent the bill seeking to change the way companies invest in new generation capacity to the country's parliament. If the bill becomes a law, the Supreme Court will likely strike it down as well, according to analysts.
"The bill is much more aggressive against the rights of private investors than the reliability policy, so this is an unmistakable indication that the proposed reforms in the bill would be unconstitutional," Pablo Zarate, Mexico managing director of consultancy FTI Consulting, told the WSJ.
By Charles Kennedy for Oilprice.com
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