Government’s Regulatory Restructuring Under Scrutiny

President López Obrador unveiled his plan to bring several independent regulatory bodies created by the Energy Reform back into the ministerial fold by dissolving them to reduce what the government considers unnecessary public spending. Since the move would affect the energy regulatory commission CRE directly, private energy players could also feel its effects.

In a bill outlining the government’s strategy for 2021, the independent regulatory bodies will be completely absorbed by the ministries, meaning that CRE would become a part of SENER. Whereas the idea regarding absorption and ending independence is a new one, the budget cuts have been a staple of López Obrador’s strategy to cut down on public spending, reported Forbes. After all, the president has cut the budget of energy regulators by an average of 70 percent over the past three years.

López Obrador says the move could save the government up to MX$20 billion (US$1 billion) and would help the government combat corruption. “We need to save, be efficient. We do not need to have so many entities that consume the budget, so that it stays in the government and is not transferred to the people,” the president said last week during his morning conference. “It is necessary to have an adequate definition of their role in the midst of the failed reversal of the Energy Reform,” he added.

Head of CFE Manuel Bartlett supported the president’s statements, arguing that the regulatory bodies could be “hindering” and that the Energy Reform essentially took state functions and gave them to autonomous bodies.

Other than CRE, the Federal Competition Commission (COFECE) and the Federal Telecommunications Institute (IFT) could also be absorbed. CNH would retain its functions according to the plan. Various experts say the assimilation is bad news, according to El Financiero. Miguel Flores Bernés, President of the Economic Competition Commission of the International Chamber of Commerce (ICC), noted that this process would turn the autonomous bodies into political entities, effectively losing their original raison d'etre: to “make technical decisions.” Eduardo Pérez Motta, Partner at SAI Derecho & Economía, agrees. “Regulatory bodies must be of a technical nature, the only loyalty that commissioners and members of authorities should have is to the mandate of the law because that is how they generate trust that markets require to operate efficiently. Their only job is to enforce the law, not do politics,” he said. By eliminating this function, SENER could enforce the government’s goals more freely in the energy sector, which experts agree could jeopardize private investment in the sector.