AMLO Insists that Iberdrola Pays US$466 million

On May 26, 2022, CRE announced that it would fine the Nuevo Leon-based arm of Spanish energy giant Iberdrola US$466 million for carrying out self-supply practices based on illegal contracts via its power plant in the northern state. Two weeks later, the president confirmed that the fine will be sustained.

On June 9, 2022, President Andrés Manuel López Obrador reiterated Iberdrola’s obligations to obey the law, as CRE has found it guilty of violating Art. 36 of the Public Energy Service Law, as well as 90 percent of the corresponding regulation. “This is CRE’s business, it is sustained and [Iberdrola] has to pay the fine. They can go to other government bodies and to court. But I have no doubt that this fine will be sustained because they were, and in some cases still are, violating the law through self-supply… The Supreme Court has determined… that the famous self-supply scheme is fraudulent,” the president elaborated during a press conference.

Here, he referenced the court’s decision to reactivate his administration's Electricity Industry Law (LIE) proposal of 2021, which among other tenets allows CRE to revise self-supply contracts and deem them illegal if they are found to be deficient. The decision, however, did not rule that all contracts in this legacy scheme are illegal as such.

López Obrador emphasized that current clients of Iberdrola’s would have to get their supply from CFE and manage their switch. Additionally, he explained that he had talked to CFE Head Manuel Bartlett Díaz, and suggested that the state utility could offer the same conditions to these clients to counter any complaints. Lastly, he claimed that several clients had already reached out to CFE to arrange their electricity supply.

The president also clarified that these measures were not intended to discourage foreign investment, nor stop granting guarantees, as he organized talks with several private companies and alluded to investments that amount to a sum between US$20 to US$30 million. The case of Iberdrola was different because, as he sees it, the leadership of the Spanish company “thinks that once this government’s term was over, they could go back to their usual business.”

The Spanish energy giant, the largest private company in Mexico’s energy sector, denies having broken any rules. Iberdrola argues that the invoices presented by the CRE do not prove the alleged illicit sale of electricity and that the law does not explicitly prevent payments from its partners. "The rules do not prohibit, limit or regulate the relationship that should exist between permit holders and their partners. Therefore, this relationship is a freely permitted activity. What the law prohibits… is that energy cannot be sold to companies that are not partners in the self-supply scheme,” said the company.

Víctor Rodríguez Padilla, a Researcher at UNAM, argued that the government has a point with the fine, even though the self-supply scheme is more at fault than the private producers that operate under the contract modality. Nevertheless, he does expect Iberdrola to go to court. Importantly, contracts granted through the energy auctions are based on the LIE and therefore protected. Rodríguez went on to say that the “real problem in this country’s energy sector is the overlapping of organizational and regulatory models that started in 1992, which due to the Energy Reform of 2014 have complicated the industry.”