The clashes between businessmen and the Mexican government over the electricity reform

The clashes between the business community and the Mexican government over the controversial electricity reform, which aims to limit private participation in the sector, have worsened this week.

While the president Andrés Manuel López Obrador has denounced “a vile looting”, the Business Coordinating Council (CCE) has accused the Secretary of Energy, Rocío Nahle, of “lying” and of being “guided by ideology”.

These are the five main discrepancies between the leadership of the private sector and the Government of Mexico on the constitutional reform of the energy sector, whose discussion is about to begin in Congress.

Monopoly or market

The initiative, which would reform articles 25, 27 and 28 of the Constitution, would limit private participation in the electricity generation market to 46%, while the remaining 56% would go to the Federal Electricity Commission (CFE), current company of the State.

“The CFE will control the dispatch of electricity and will be able to sell its electricity produced and obtain higher income. Likewise, it will continue guaranteeing to bring to the 46.2 million users constant energy 24 hours a day, ”Nahle said on Monday.

Although the Ministry of Energy (Sener) denies it, the CCE accused this Wednesday of the initiative of “destroying the market” because it eliminates the autonomous regulator, the Energy Regulatory Commission (CRE), and the independent operator of the system, the National Center of Energy Control (Cenace).

“Why would the reform create, in practice, a monopoly? Because it would convert the generation, distribution and commercialization of energy, now open to competition, into ‘exclusive activities of the nation’ controlled by CFE ”, indicated the business leadership in a report.

Cost of electricity

The reform would modify dispatch rules, which are now guided by an economic criterion, to prioritize hydroelectric and fossil fuel plants of the CFE, and lastly those of renewables and combined cycle of the private ones.

The Secretary of Energy has said that “it is not true” that it is “very cheap” to pay clean energy to private companies, arguing that the CFE has paid more than 6,000 million pesos (almost US $ 290 million) to 335 private plants for Certificates. Clean Energy (CEL).

But the CCE asserted that the reform would increase the cost of generation because the electricity generated by the CFE is up to 252% more expensive, or 3.5 times more, than that of the private sector.

Fees and subsidies

Secretary Nahle and the president have promised that, after the reform, the price of electricity will remain below inflation.

But the CCE argued that the price of the CFE “has not fallen in the last two years” while that of the private market has decreased 29%.

The business organization estimated an increase of 62.100 million pesos (more than US $ 2.99 billion) in the cost of production of the National Electric System (SEN) that would have to be remedied with greater subsidies to the consumer.

“By 2031, together with the electricity subsidy, the cost overruns would reach more than 1.4 trillion accumulated pesos (almost US $ 67,470 million),” he calculated.

Climate commitments

Businessmen have predicted that if the reform is approved, Mexico would not meet its clean energy goals because its emissions will rise by almost 50%.

In addition, this reform indicates that the energy transition “is in charge of the State.”

The reform “would cancel the energy transition and prevent the operation of clean energy, solar and wind plants throughout the country, which in Mexico are almost 100% private,” said the CCE.

But the head of the Sener has argued that hydroelectric plants generate “the cleanest and firmer energy” and that CFE’s geothermal energy is “sustainable”, in addition to accusing wind and solar plants of “being intermittent.”

“We are going to comply with all the agreements that have been signed: the agreement to generate electricity through clean energy, 35% by 2024, we have no problem for it,” said Nahle.

International deals

The business chambers have warned that the reform would violate trade agreements, in particular the Treaty between Mexico, the United States and Canada (T-MEC).

The CCE foresaw that investors go to international panels to protect US $ 44,000 million of investment that they consider at risk of confiscation or indirect expropriation, in addition to promoting international controversies from State to State.

But President López Obrador responded this Wednesday that “the treaty does not prevent corruption from being avoided in Mexico, there is nothing that has to do with protecting companies to abuse users.”