Jesús Enrique Pablo Dorantes
Expert in Environmental Impact, Soil and Groundwater Pollution
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Environmental Implications of Top Court’s Electricity Decision

By Jesús Enrique Pablo-Dorantes | Wed, 04/27/2022 - 16:00

On March 9, 2021, President Andrés Manuel López Obrador announced the decree to reform the Electricity Industry Law, with the addition of various provisions[1].

With modifications to only nine articles and five transitory articles, the publication caused alarm among concessionaires and investment funds that invested in infrastructure for the use of renewable energies, increasing the degree of concern among the 50 countries that are Mexico's trading partners through 13 trade agreements.[2]

The mention in the transitory articles of a presumption of fraud in the granting of self-supply permits, the obligation to review contracts with commitments to generation capacity and the purchase and sale of energy, as well as the requirement to renegotiate or terminate in advance contracts that do not guarantee profitability for the federal government, added to the change in the order of energy dispatch, was the icing on the cake that revealed the intention to return to a state monopoly in the energy sector.

A wave of independent producers seeking constitutional protection (amparo) against the presidential whim was not long in coming, initiating some 256 lawsuits arguing that the decree affects free competition and has a negative impact on the environment.

In this context, the Senate filed an action of unconstitutionality against the decree, consisting of eight concepts, the draft analysis of which was prepared by Minister Loretta Ortíz and was discussed and voted on in the sessions on April 5 and 7, 2022, being assigned file No. 64/2021.

Although other articles were addressed, the framework of the discussion focused particularly on Article 25 of the Mexican Constitution, which states: The Country is responsible for guiding national development to ensure that it is comprehensive and sustainable, strengthening the Sovereignty of the Nation (...) and thus, under criteria of social equity, productivity and sustainability, it will support and promote enterprises in the social and private sectors of the economy, subjecting them to the modalities dictated by the public interest and the use, for the general benefit, of productive resources, taking care of their conservation and the environment.

Given the way in which Minister Loretta Ortíz's draft was presented, there were moments when the vote confused the judges and the secretary, as there were articles that were voted on at the same time, in favor and against, by the same magistrate.

Even so, the ministers in favor of declaring the decree unconstitutional were Luis María Aguilar Morales, José Mario Pardo Rebolledo, Alberto Pérez Dayán, Norma Lucía Piña Hernández, Ana Margarita Ríos Farjat, Javier Laynez Potisek and Juan Luis González Alcántara Carrancá.

While those who believed that it should be considered constitutional were Loretta Ortíz Ahlf, Yasmín Esquivel Mossa, Alfredo Gutiérrez Ortíz Mena and Chief Justice Arturo Zaldivar.

Consequently, although there is a majority of votes against the project presented by Minister Loretta Ortíz, the rules that apply to this type of decision indicate that the proportional majority required to declare the unconstitutionality of the March 9 decree was not reached, so the action requested by the Senate is left without effect and the right of individuals to file amparo lawsuits remains in force.

More than a year after the Decree was published, uncertainty about the rule of law remains and it is no surprise that Mexico has lost the interest of foreign direct investment.

There are still some interested parties but they are those who keep their focus on the long term, in the hope that Mexico will recover the path we lost in July 2018.

Some aspects to be taken up again from the discussion and which should be considered in the amparos, which are expected to be taken up by those affected, are:

  1. Minister Loretta Ortíz considered that the Federal Electricity Commission (CFE) does not affect the environment. Ortíz reached this conclusion by considering that the CFE produces most of its energy from clean sources, of course, through hydroelectric plants, and in view of the imminence of its photovoltaic project in Puerto Peñasco, currently being analyzed under the Environmental Impact Assessment Procedure. According to their logic, since there is no impact on the environment, there is no impact on health, and human rights are safeguarded in both areas. In this regard, Minister Ortíz Ahlf should be reminded of the number of studies that relate to respiratory illnesses in the population surrounding the operation of the Tula Thermoelectric Plant, as well as the variation in air quality data in Mexico City, following the reconversion of the plant to burn PEMEX's surplus fuel oil.
  2. Analyze the European case in terms of the need for an interconnected system, which allows us to take advantage of renewable sources in more remote regions. It is obvious that if we only depend on a photovoltaic park, when it gets dark, we will not have any energy. Remember that the Baja California peninsula is not connected to the national grid, so the wind potential can only be harnessed intermittently in that region. The same is true for the Oaxaca region, for which CFE has not developed the infrastructure to be able to introduce the full potential of the area to the national grid.
  3. The order of dispatch is an issue that will still generate discussion because, from the point of view of Minister Gutiérrez Ortíz-Mena, who in terms of economic competition is in favor of the constitutionality but, considering environmental protection, he spoke out against the decree because renewable energies require reinforced constitutional protection. In this sense, he mentioned that CFE should be under the scrutiny of the Federal Economic Competition Commission.

In this way, the work of experts involved in trials will be meaningful. An expert who answers a huge number of questions will only confuse the judges.

[1] Secretaría de Energía (2021). DECRETO por el que se reforman y adicionan diversas disposiciones de la Ley de la Industria Eléctrica. https://www.dof.gob.mx/nota_detalle.php?codigo=5613245&fecha=09/03/2021

[2] Secretaría de Economía (2020). SICAIT Sistema de Información de Tratados Comerciales Internacionales http://www.economia-snci.gob.mx/sicait/5.0/