Mexico’s Supreme Court throws out power companies' challenge to electricity law

Wind farm investment has slumped and new project development has slowed amid battles over legal reforms

(pic credit: Hector Vivas/Getty Images)
(pic credit: Hector Vivas/Getty Images)

Mexico’s Supreme Court has narrowly thrown out a challenge against legislation seeking to strengthen state control over the electricity sector, just days before the government faces a key vote on its plans to overhaul the industry.

The country’s wind power industry faces continuing uncertainty and further legal challenges are expected to President Andres Lopez Obrador’s reform attempts, an analyst told Windpower Monthly.

In the ruling issued 7 April, judges voted by seven to four in favour of a suit brought by power companies against the government. However, this fell short of the two-thirds majority needed to declare the electricity industry law unconstitutional.

The president celebrated the “historic and patriotic decision” as guaranteeing the future of state power utility Comisión Federal de Electricidad (CFE) and shielding consumers from rising energy prices.

Elected four years ago, the left-winger is pushing to reverse his predecessor’s liberalising reforms which had allowed privately owned wind farms to take market share from CFE’s ageing thermoelectric and hydroelectric plants.

“The people have been protected from abusive increases in the electricity bill in the future, so I am very happy,” the president said in his daily press conference on 8 April.

However, business leaders and foreign governments have warned that his reforms will weaken the competitiveness of its energy supplies and undermine efforts to fight climate change.

As a result of the changes, Mexico’s wind energy association Amdee estimates that investment in wind energy will fall to less than $1 billion this year, compared to a peak of $5 billion in 2018, leaving around 7GW of new projects in limbo.

According to Arturo Carranza, an energy analyst at business consultancy Akza Advisors, the Supreme Court ruling will do little to resolve the uncertainty for investors who are likely to press ahead with hundreds of individual injunctions presented against the law

“Seven of the eleven judges were clear that the changes were anti-constitutional and, if the court has to resolve the cases one by one, this will not be immediate,” he told Windpower Monthly.

The ruling came as Mexican lawmakers prepared to vote on the government’s constitutional reform to limit the participation of private companies in the country’s electricity market.

However, on 11 April, the ruling Morena party announced that the vote in the lower chamber of deputies had been delayed by five days until Easter Sunday (17 April) as it seeks to win opposition support for the reform which needs a two-thirds majority to pass.

Morena had presented the reform package last October

Last week, the centre-left PRI party called on its deputies to vote against the reform, but some deputies could switch sides after Morena agreed to include nine opposition proposals into the legislation, including maintaining the autonomy of Mexico’s electricity and hydrocarbons regulatory agencies.

However, with the Supreme Court ruling, President Lopez Obrador said that the battle was already half won.

“Now it’s time for the constitution reform, but the truth is that what was achieved yesterday has lightened the burden as we can keep CFE, rescue this public company and stick to our commitment not to raise power prices,” the president said on 8 April.

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