Supreme Court Reactivates Electricity Industry Law
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Supreme Court Reactivates Electricity Industry Law

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María José Goytia By María José Goytia | Journalist and Industry Analyst - Fri, 04/08/2022 - 18:15

The National Supreme Court of Justice (SCJN) voted on the constitutionality of the Electricity Industry Law (LIE), which passed through Congress in 2021. With seven votes in favor of unconstitutionality and four against, the LIE will reactivate, yielding CFE a stronger position in the market. However, the lack of a qualified majority means legal routes remain open for those directly affected by the law.

The split vote allows the electricity law approved on March 9, 2021, to remain in effect. The resolution returns more control of the electricity market to CFE, as it establishes a dispatch preference for its electricity generation, regardless of costs or pollution levels.

Ministers Loretta Ortiz Ahlf, Alfredo Gutiérrez Ortiz Mena, Yasmín Esquivel and President Arturo Zaldívar voted in favor of the constitutionality project presented last week by Ortiz. On the other side, Ministers Juan Luis González Alcántara, Luis María Aguilar, Jorge Mario Pardo, Norma Piña, Margarita Ríos-Farjat, Javier Laynez and Alberto Pérez Dayán voted for in favor of the LIE’s unconstitutionality.

The decisive vote was cast by the president of the court, Minister Arturo Zaldívar, who before voting for the validity of the law, stated that "our Constitution does not impose one economic model over another.”

The voting results dismiss previous legal challenges against the LIE. However, the Supreme Court will not issue any jurisprudence on the LIE’s validity, since an agreement with a qualified majority vote was not reached. This leaves the door open for amparos, a type of injunction, to continue, which grants courts the liberty to issue rulings on a case-by-case basis.

Rosanety Barrios, an independent analyst, explained the relevance of the vote not being fully carried by either side. Although uncertainty will continue in the energy sector, Barrios highlights the relevance of maintaining amparos as a tool to protect business.

During the Supreme Court’s session, several ministers voiced their concern regarding the impact the LIE could have on private investment and the promotion of clean energy in Mexico. When casting their vote for unconstitutionality, the seven ministers considered that the LIE does not support free economic competition in the country, nor does it guarantee the protection of the environment via renewable energy-based power production.

Ortiz Ahlf, the speaker of the LIE’s constitutionality draft, was allowed to cast her vote despite her personal proximity to the López Obrador administration and the potential conflict of interest considering her past role as a legislator during the approval of the 2014 Energy Reform.

The issue that the Supreme Court voted on entailed just a part LIE, although this part is considered the most important as it establishes a priority for the state utility in the dispatch, as opposed to the previous economically-minded model.

Nevertheless, the court’s vote on the LIE is not over. The debate will continue because other resolutions are still pending regarding the compatibility of the LIE with international environmental and economic treaties, the clean energy certificate (CEL) mechanism, the revocation and review of permits, the National Electric System (SEN) and end-user tariffs.

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