House of Representatives Approves the Amendment of Mexico’s Electricity Industry Law

Mayer Brown - Energy Forward

On February 23, 2021, the House of Representatives discussed and approved the draft of the Amendment of the Electricity Industry Law proposed by Mexico President López Obrador on February 1 (the “Amendment”), with a total of 304 votes by the representatives of MORENA, the political party of the president which holds a majority of seats in the House of Representatives.

The plenary session followed up a heated discussion by the Energy Commission of the House of Representatives on February 19, in which the minority parties submitted a motion to include a dissident note in the Energy Commission’s final verdict,1 including the expert opinion issued by the Federal Economic Competition Commission.2

During the general debate in the House of Representatives, the minority parties actively challenged arguments and procedures of the Amendment and its discussion; however, the Amendment was approved by the majority of the House of Representatives.

Recently, the Second Chamber of the Mexican Supreme Court overruled the Policy for the Reliability, Safety, Continuity and Quality of the National Electric System (the "Policy"), because such Policy included unconstitutional provisions that would adversely affect competition in the electricity market. The Amendment emulates several provisions of such Policy, which is one of the reasons why it is seen as another blow to the power industry.

As mentioned in our previous analysis, one of the most relevant features of the Amendment is the modification of the dispatch order, disregarding economic efficiency mechanics, giving preference to the Federal Electricity Commission (Comisión Federal de Electricidad "CFE") over other generation plants, which will result in more expensive and dirty energy.

For this Amendment to be enacted, the Senate will also have to approve it. It is possible that the Senate will send back the draft to the House of Representatives with new suggestions for their consideration.

 

1 Additionally, different chambers of commerce made several official statements with respect to the Amendment: (i) The Business Coordinating Council (CCE) noted that, if approved, the reform would contravene the Sustainable Development Goals of the UN 2030 Agenda, the Commitments in investment treaties and the Paris Agreement; (ii) the Confederation of Industrial Chambers (CONCAMIN) considered that consumers will be forced to consume polluting energy; (iii) the Mexican Institute for Competitiveness (IMCO) expressed concern about the legal uncertainty to investment that the approval of the reform would cause; and (iv) the United States Chamber of Commerce indicated that in addition to making prices more expensive, it would violate the commitments that were recently acquired in the USMCA.

2 The antitrust watchdog's opinion considers that the bill is unconstitutional, in particular article 28, affecting the principles of free competition in electricity generation and supply; as well as the international commitments to reduce carbon dioxide emissions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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