Mexican Federal Court Issues Temporary Stay on Orders Restricting Renewable Energy Projects

Holland & Knight LLP

Holland & Knight LLP

The Second District Court in Administrative Matters Specialized in Economic Competition, Broadcasting and Telecommunication matters in Mexico issued a temporary order to stay the application of the National Energy Control Center (Centro Nacional de Control de Energía or CENACE) and Secretary of Energy (Secretaría de Energía or SENER) orders issued on April 29, 2020, and May 15, 2020, respectively. The decision was delivered in the context of an amparo petition brought by Greenpeace México, S.C., an environmental nongovernmental organization (NGO).

The court order is an important development for two reasons: 1) the amparo petition is the first constitutional action brought against both the CENACE order and the policy published under the SENER order, and 2) since the petition was brought by an NGO, the constitutional effects of the stay may temporarily benefit energy sector players as the court analysis is made under the "legitimate interest" doctrine, which allows the review of governmental action considering collective rights, and may force regulators and authorities to suspend the application of the orders.

The court concluded that the petition to stay met the following three-prong test applicable to the case:

  • The orders are certain, identifiable acts of authority.
  • Both orders are susceptible to produce immediate legal effects that are subject to a stay.
  • The petitioner has standing, and the stay does not contravene the public interest (interés social) or public policy provisions (orden público).

The orders are susceptible to produce immediate legal effects that are subject to a stay.

The court found that the SENER order generates the following legal effects that are susceptible of being stayed: 1) obligations imposed on governmental authorities in the energy sector (affecting legal provisions regulating the issuance of generation permits, interconnection requests and the dispatch rules of renewable-energy-sourced electricity) and 2) application of guidelines for the operation of the National Electric System (Sistema Eléctrico Nacional or SEN).

The petitioner has standing and the stay order does not contravene public interest nor public policy provisions.

Legitimate Interest

The court found that the petitioner, in its capacity as an NGO fostering public policy change and environmental protection, has standing to request a temporary order to stay (suspensión provisional). The petitioner has, in principle, a "legitimate interest" in challenging the orders as unconstitutional based on their potential violation of constitutionally protected rights and interests, namely: the right to a healthy environment, sustainable development, and free competition and contestability in the power generation industry.

Public Interest

The court found that the stay order would not affect public interest or public policy provisions because, in principle, 1) it would protect constitutional rights by allowing the use of renewable energy as a means to improve people's life quality, 2) it would allow Mexico to comply with obligations and commitments set forth in national laws and international treaties such as the Paris Agreement and 3) at the moment, there is no evidence that the stay would "paralyze" Mexico's energetic security.

Notably the court, in conducting a preliminary analysis of the orders and just in the context of issuing the stay, found that:

  • On its face, it appears that 1) the purposes of the CENACE order are not logically related to the COVID-19 emergency measures, 2) the prohibition preventing renewable energy power plants to conduct preoperative tests displaces the use of renewable energy in favor of pollutants and 3) applicable law already provides for mechanisms to deal with intermittency issues related with any preoperative tests
  • On its face, it appears that the SENER order, by replacing sustainability and efficiency principles with the "reliability" policy in the operation and dispatch rules of the grid, would foster the generation and use of carbon-based fuels and limit the generation of clean energy, thereby affecting constitutional rights and Mexico's compliance with its own 2030 Sustainable Development Agenda goals and international sustainability commitments under the Paris Agreement.
  • On its face, it appears that the SENER order was issued without following all applicable formalities under applicable law, in particular, without the issuance of a final report (dictamen) by the National Commission on Regulatory Improvement (Comisión Nacional de Mejora Regulatoria).

Temporary Stay

The temporary stay order has the following effects:

  • suspension of all legal effects and consequences derived from the CENACE order
  • suspension of all legal effects and consequences derived from the SENER order, including an order directed to all governmental authorities obligated under the reliability policy published pursuant to the SENER order, including the National Energy Commission (Comisión Reguladora de Energía or CRE) and the CENACE

The court scheduled a hearing to review the stay measure on June 4, 2020. The Mexican government may file a motion to appeal (queja) the district court order to stay before a circuit court of appeals (Tribunal Colegiado de Circuito). If such motion is not filed or the hearing occurs without a decision by a circuit court of appeals, the stay order may become definitive and remain in effect until a final decision on the merits is delivered.

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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