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Mexico Plots Demise Of Hundreds Of Private Power Plants

Mexico’s populist president Manuel Lopez Obrador announced a plan on Monday that would essentially kill hundreds of power plants.

Obrador laid out some hefty constitutional reforms on Monday—reforms that would nix the contracts that 34 private power plants sell to the grid, according to the China Post.

But even more startling, the reform would also label 239 additional private plants that sell directly to corporate clients in Mexico as illegal.

The populist plan is just the latest in a series of steps that Obrador has taken to restore federal control over all things energy. But reforming the country’s energy sector has proven difficult thus far.

Environmentalists may take issue with some aspects of Obrador’s plan, which would put Mexico’s private natural gas plants at nearly last in line when it comes to selling electricity to the grid, behind only coal-fired plants.

Obrador’s bill must now get past congress. If successful in solidifying the necessary 2/3rds majority, the federal utility would absorb more of the market left by the crippled private sector, retaking its place in the sector despite its cost inefficiencies.

To sell congress on the plan, Obrador has used Spain and the astronomical power prices as a cautionary tale of what can happen when the private sector takes over the energy market.

“If this Constitutional reform isn’t passed, these companies will wind up taking over all of the electricity market and we will get what is happening in Spain right now, where electrical rates are going through the roof,” Obrador said in defense of his proposed reform.

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The plan is expected to generate some legal pushback from the private sector if the bill is passed.

By Julianne Geiger for Oilprice.com

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