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Legislators reject electrical reform in Mexico

The Chamber of Deputies of Mexico rejected this Sunday the electrical reform proposed by President Andrés Manuel López Obrador.

While the vote resulted in 223 against and 275 votes in favor, 334 votes were required to pass the electricity reform.

On September 30, 2021, the Executive sent to the Congress of the Union a constitutional reform initiative in electricity matters with the fundamental objective of making CFE the only company that can sell energy to end customers (sales monopoly), reducing the role of private companies as energy suppliers to the CFE (purchase monopoly), in addition to eliminating the regulator (CRE) and incorporating the system operator (CENACE) into the CFE.

In addition, the proposed electricity reform would impact the electricity market, by canceling existing contracts with private generators, guaranteeing that the CFE generates at least 54% of the energy required by Mexico, and canceling long-term energy supply contracts and preferential power purchase programs. clean energy.

From 2019 to 2021, Mexico received 19,982 million dollars of Foreign Direct Investment (FDI) flows in the productive branch of generation, transmission and distribution of electrical energy, of which 2,441 million corresponded to US investors.

According to a previous British government report, the Mexican government has sought to revive the fortunes of state-owned hydrocarbon and electricity companies PEMEX and CFE. Therefore, the business environment has become more difficult, due to changes in regulation and general uncertainty, for private and foreign investment in the energy sector, particularly in clean energy.

Electrical reform

The vote was the first legislative defeat for the López Obrador government in three and a half years.

Legislators from the PAN, PRI, PRD and MC voted against the electricity reform proposal, while Morena (López Obrador’s party), PT and PVEM voted in favor.

Also in previous weeks, the United States Trade Representation (USTR) stressed that the US government “is seriously concerned” about these developments, and immediately added that it continues to analyze these actions and measures so that they are consistent with Mexico’s obligations in the Agreement. between Mexico, the United States and Canada (USMCA).

The USTR claimed that throughout 2021, US energy companies complained about government-wide efforts to promote Mexico’s state oil company Pemex and CFE at the expense of foreign private investors.

To lobby in favor, López Obrador declared before that with the electrical reform, energy prices for Mexicans will be reduced.

Two weeks ago, the Supreme Court of Justice of Mexico validated that the Electricity Industry Law prioritizes the dispatch of energy to the CFE network over energy generated by private electricity producers, including renewable energy plants.

 

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