Industry Reacts to Approved Energy Bill

After the Senate’s approval of President López Obrador’s energy bill, specialists are expecting a surge in legal protection requests from energy generators, as well as from companies that participated in energy auctions. An increase in energy prices is expected, as well. 

Any energy project currently being developed is expected to be affected. David Berezowsky, Attorney at Foley Arena Mexico, stated that there is a big problem coming to Mexico. The approved energy bill will bring more tension to an already nervous group of national and international investors. In the following days, it is expected that an increasing number of legal protection requests will be petitioned by the private sector and NGOs, as well as a number of international disputes under new international treaties.

Foley & Lardner had previously discussed the bill’s modifications, reported Real Estate Market, which essentially consist of halting governmental power auctions to ensure capacity and electricity from the private sector. Hence, no new renewable power projects will be developed in the coming years. Existing power projects could end up being financially jeopardized and power generation and power trading will not be provided under free market conditions. With the passing of this energy bill, Mexico certainly sends a negative statement to potential and existing investors in the energy sector.

Berezowsky said the economic damages caused by the energy bill could be as bad as the damages caused by the cancelation of NAIM in Texcoco. He continues to explain how all energy generators will be heavily affected, not only because of power delivery but also because of multiple permit cancelations. CFE is not capable of satisfying energy demand at 100 percent. CFE stations are old and experience temporarily blackouts, causing massive ones like the one that left millions of citizens without power in the northern part of the country a few weeks ago, as reported by MBN.

Transparency regarding the new energy bill is a matter of great importance and discussion. Jon Piechowski, Deputy Assistant Secretary of State, Bureau of Western Hemisphere Affairs at the US Department of State, mentioned during a virtual conference some concerns from the private energy sector. Nevertheless, Piechowski said the US respects Mexico’s sovereignty and its laws. Transparency is really important to investors. The US Department of State has been in conversation with all levels of the Mexican government, reporting on everything they know. The hope is to continue the discussion and cooperation between the sectors of both countries, said Piechowski.

There is also a possibility of an energy price increase following the bill’s enactment. During the debate in the senate, Noé Castañón, Senator from Movimiento Ciudadano, described this as a step back in time. It also breaks with international commitments, such as the Paris Agreement. “The consequence of this counter-reform will be an increase in energy generation prices, which will hurt everyone’s pockets,” said Castañón. The International Energy Agency has shown an increase in renewable energy. This is due, primarily thanks to China and the US. In 2021, renewable energy is expected to have a record increase of 10 percent. Sadly, this energy bill will leave Mexico out of this extraordinary figure, the senator stated during Senate debate.