CRE Rejects Yet More Iberdrola Permits

The Energy Regulatory Commission (CRE) has denied permits to Iberdrola to modify at least four permits, leaving some of the Spanish service provider’s plants in a precarious situation as active contracts are due to expire. Following a May 16 session, the CRE, under the presidency of Leopoldo Melchi García, denied a series of proposed permit modifications amid a protracted conflict between the state regulator and the Spanish company. 

One such permit denied was a proposed modification to a contract concerning its Bajio Cogeneration power plant. The facility, located in San Juan del Río, Querétaro, has an installed capacity of 52MW and is the second cogeneration power plant built in Mexico for Kimberly Clark following the Ramos plant in Coahuila, which began operations in 2016 and has the same capacity.

Another facility located in Tamaulipas with a 150MW capacity is soon to face similar issues as its interconnection contract is set to expire in Sept. 2022. Iberdrola's other permits are due to run out in 2027. Meanwhile, plans to generate power at another plant, as well as further proposals for expansion in Mexico, were similarly rejected. Moreover, CNH announced that it had initiated an investigation against Iberdrola for the alleged illegal sale of electricity in the legacy market.

Following simmering tension that emerged at the start López Obrador administration, CFE and Iberdrola have been in open conflict since 2021, when the Spanish multinational filed an international arbitration case against the regulatory body, this after CFE fined Iberdrola US$190 million for delays in the construction of a power plant in the port of Topolobampo, Sonora. Iberdrola’s defense team have cited force majeure due to the COVID-19 pandemic as a legitimate reason for the company’s failure to meet deadlines. 

Iberdrola also went to court at the start of 2022, after CRE refused to renew the contract for Iberdrolas’s Dulces Nombres plant in Nuevo Leon. The contract for the 1,008 MW power plant, Iberdorla’s first in Mexico having been opened in 1999, expired on Jan. 31 this year. CFE proceeded to cut off the plant from the grid before a court provisionally ruled in favor of Iberdrola at the end of April. 

This crackdown comes after the Ministry of the Environment and Natural Resources (SEMARNAT) denied environmental authorization to Iberdrola's proposed Merida combined cycle plant, which promised investment of MX$8.44 billion (US$423.35 billion) in the central region of the Yucatan peninsula. The regulator announced last month that the project failed to comply with several environmental provisions set forth in the Ecological and Territorial Ordering Program of Yucatan, and the Municipal Urban Development Program of Kanasin, as well as the General Law of Ecological Equilibrium and Environmental Protection.

Among the reasons cited for the permit refusal, the environmental authority pointed out that the 31.2ha site proposed for the project is located in an ecological area of great importance, just meters from a group of cenotes. The project also lacked a formal proposal for flora and fauna rescue and relocation, as well as concrete plans for restoration or rehabilitation at the decommissioning stage.

President López Obrador has previously accused companies such as Iberdrola of corruption and repudiated the contracts granted to such companies under previous administrations, which he said allowed them to take advantage of CFE and plunder Mexico’s natural resources while neglecting environmental responsibility.  These alleged abuses have been cited by the president as justification for the proposed reforms to the Electricity Industry Law (LIE) and a return to state monopoly over energy. "I sent the initiative to strengthen CFE, [previous administrations] wanted it to disappear in favor of private companies, especially foreign, corrupt ones. Imagine how much we will save if we stop giving subsidies to these foreign companies, to Iberdrola, for example," commented López Obrador earlier this year.