Mexico to start electricity bill debate next week

Mexico's lower house will start its debate on 29 March of a constitutional electricity reform bill that would cap private-sector participation but the chances of its approval remain slim.

"The debate will start next week and it is likely that, by the middle of April, the lower house will be voting on the bill," President Andres Manuel Lopez Obrador said today.

Lopez Obrador presented a constitutional electricity reform bill on 1 October but a date for its debate in parliament has been repeatedly delayed in an effort to garner more support from opposition members.

The bill seeks to restore state power company CFE's monopoly by cancelling all private-sector power generation contracts and capping private market share at 46pc. The bill would also hand grid management and tariff-setting responsibilities to CFE, shutter the energy regulatory commission (CRE) and absorb oil regulator CNH within the energy ministry.

Lopez Obrador called on legislators to approve the bill.

"Without the reform, CFE will disappear and that would be very serious for the Mexican people," Lopez Obrador said.

Industry, ratings agencies and think tanks all agree that the reform would increase power tariffs as CFE's generation portfolio — that would be prioritized in dispatch — is older, less efficient and more dependent on polluting and costly fuels including fuel oil, diesel and coal.

US ambassador to Mexico Ken Salazar called on legislators yesterday to reject the bill and respect independent power producer contracts, arguing, "Without investor confidence, there will be no investment."

Foreign direct investment in Mexico's electricity sector dropped to a 10-year low of $452mn last year amid uncertainty caused by the government's attempts to roll back the 2014 energy reform that opened the door to increased private-sector investment.

Cancellation of private-sector generation permits — some 40,924MW, or 48pc, of Mexico's installed capacity — will attract arbitration under free trade agreements including the US-Mexico-Canada free trade agreement (USMCA), lawyers have said.

Morena party legislators hope to approve the bill in the lower house before it is sent up to the senate for debate on 14 April.

Lopez Obrador's Morena party is short of the two-thirds majority required for constitutional reform and PAN senator Julen Rementeria said yesterday that the bill will fail in the senate.

"This bill is dead in the water, there is no way it will pass," Rementeria said, claiming PAN and PRI senators will not approve it.

By Rebecca Conan