Potential Monopolistic Practices Threaten Energy Sector: COFECE

The Federal Economic Competition Commission (COFECE) has started investigating a complaint against the Federal Electricity Commission (CFE). "The procedure is the beginning of an administrative investigation to determine, if applicable, practices that may constitute a violation of the Federal Economic Competition Law," informs COFECE, warning that possible monopolistic practices may affect the generation and supply of electricity in the country. Previously, the commission had advised that modifying the Electricity Industry Law (LIE) could lead to monopolistic practices and warned that it would sanction the companies involved with up to 8 percent of their revenue.

Industry experts have warned that the changes would increase the cost of energy and damage CFE's transparency. Régulo Salinas, President of the Confederation of Industrial Chambers Energy Commission (CONCAMIN), told El Milenio that the bill's reform discourages private investment due to the barriers to obtain permits. One of those is the mandatory minimum storage capacity of oil products for companies participating in the market. "This situation will generate a vicious circle between the lack of storage capacity due to the lack of permits and the lack of permits due to the lack of infrastructure," says Salinas.

 The bill's reform also allows the revocation of current permits if the Ministry of Energy and the Energy Regulatory Commission (CRE) consider them a danger to the nation, energy production or economic security. COFECE highlights that before applying this lay it is necessary to clarify the concepts of "national danger" because it risks a violation of acquired rights or an unjustified restriction on supply.

The Office of the US Trade Representative has also been vocal, stating that the bill restricts foreign investors' ability to seek international commercial arbitration with the government. "Investors are increasingly concerned that Mexico is also weakening the political autonomy of independent regulators," stated the USTR in its report "Foreign Trade Barriers 2021". The American Petroleum Institute (API), an organization that represents nearly 600 US companies in the energy market, has said that the continuous efforts of the Mexican administration limit private investors from accessing the national market, Expansión reports.

The Ministry of Energy published in the Official Gazette of the Federation (DOF) the temporary postponement of the energy reform due to a suspension mandated by Federal Judge Juan Pablo Gómez Fierro. The Mexican government has allowed private companies to explore and extract hydrocarbons and participate in downstream operations since 2013 as generation and commercialization are open to private companies. Still, the State regulates the transmission and distribution of electrical energy by law.