Image credits: Ken Salazar on Twitter
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News Article

AMLO Continues Push Against Private Producers Despite Dialogs

By María José Goytia | Wed, 06/01/2022 - 10:52

Meetings continue between President López Obrador and the US Ambassador to Mexico, Ken Salazar, to discuss investment possibilities in the Mexican energy sector. For the past few weeks, the public functionaries have negotiated with US companies that hold concessions in Mexico, aiming to reach agreements to avoid lawsuits and meet the USMCA’s provisions. Nevertheless, even though the negotiations continue, López Obrador continues his efforts to revise private energy contracts.

The meetings began after the reactivation of 2021’s Electricity Industry Law (LIE) reform by the Supreme Court, which modified the order of dispatch. It also gave priority to CFE power plants, to the detriment of private power producers. and allowed the review and cancellation of contracts and permits at the discretion of the federal government.

During the meetings with US investors, President López Obrador has been accompanied by the Minister of Energy, Rocío Nahle, Foreign Minister Marcelo Ebrard, CFE Director General Manuel Bartlett and PEMEX’s Director General, Octavio Romero Oropeza.

After completing his fourth meeting with the Mexican government in 10 days to discuss energy issues, Salazar emphasized that the future of North America lies between Mexico and the US. "The ambassador's visits are because there are many pending issues with US companies in the energy sector, as well as from other countries, which were granted concessions that had no possibility of materializing," explained President López Obrador. He commented during his morning press conference that if all the contracts signed with private companies regarding energy distribution were to be fulfilled, the National Electricity System would be put at risk of oversaturation to a degree that it could "shut down" entirely. "There is no possibility that these projects can materialize. For example, there are concessions to place power plants where transmission lines are saturated. Here, you could operate the plant but cannot send electricity to transmission lines because this would cause the whole grid to explode.”

President López Obrador's administration has tried to return greater market power to state utility CFE on multiple occasions, moving through administrative measures and regulatory changes to the detriment of the private companies involved in the energy sector.

One of the main arguments of the Mexican government is that the transmission cost is absorbed by CFE when it distributes the power produced by private companies, which, according to the state-owned company, do not pay a fair transmission fee. In addition, the government argues that the energy permits granted in the past years exceed the capacity of the national system. However, experts point out that if the lack of investment in new electricity generation capacity continues, Mexico will face an energy crisis in the short term.

The data used in this article was sourced from:  
Forbes, El Universal, La Jornada, Latinus
María José Goytia María José Goytia Journalist and Industry Analyst