Mexican court lifts suspension of power reform

A Mexican court gave President Andres Manuel Lopez Obrador's electricity reform a boost today, making it more likely the new law could curtail private-sector power generation dispatch.

A Mexico City court indefinitely suspended the law on 19 March following a wave of litigation — from developers including Zuma Energia and EDF — in the 10 days after the reform became official on 10 March.

But today, the first collegiate court specializing in economic competition ordered a suspension of the reform to be revoked, arguing that the new law does not hurt companies at the moment, according to Mexico City-based energy lawyer Mauricio Leon.

The decision follows a similar decision on 1 July by the second collegiate court, which also revoked a suspension using a similar reasoning.

"There is a lot of uncertainty and distrust," Leon said when asked about private power generators' response. "Nobody is happy with these resolutions."

Mexico's new electricity law — approved following Lopez Obrador's fast-tracked legislative process — prioritizes dispatching state utility CFE-generated power regardless of cost or environmental impact, revokes self-supply permits and calls for a review process of all long-term power purchase agreements (PPAs) between CFE and independent power producers (IPPs).

The previous electricity law, enacted following the 2014 energy reform that dismantled CFE's monopoly, established an even playing field for a wave of new competitors, particularly within the renewable energy sector, while legacy IPP and self-supply contracts that preceded the reform were protected.

Yet private firms' operations will still be immune to the reform even after today's ruling because many other suspensions granted by the courts — estimated to be at least 100 — remain in effect, said Leon, an attorney at Sanchez Devanny law firm.

But the two collegiate courts are likely to revoke all suspensions as the government challenges them over the next few months — at which point authorities will be able to apply the reform, Leon said.

Once that happens, some companies will likely be able to take legal action again. The collegiate courts may view their complaints more favorably then because the reform will have taken effect, affecting their operations, Leon said.

Some 40,924 MW, or 48pc, of Mexico's installed power capacity is operated under private-sector generation permits.

Lopez Obrador has pressed for the reform to be implemented and says he will pursue constitutional reform of the country's electricity law, despite his party not holding the needed two-thirds majority of congress.

By Jens Erik Gould