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Mexico’s congress votes to give CFE power to regulate itself


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today at AMLO’s request, on Easter Sunday of all days, Mexico’s congress votes to give CFE power to regulate itself. A worthwhile read:

https://www.washingtonpost.com/world/2022/04/16/mexico-electricity-reform-amlo/

Mexico’s congress will decide on Sunday whether to give the government near-total control over the country’s electricity sector in what analysts consider one of the biggest threats to the country’s private sector in years, moving away from the production of clean energy, jeopardizing foreign investment and deepening a rift with the United States.

The restructuring, championed by populist President Andrés Manuel López Obrador, would eliminate independent regulators and halt public bids for electricity purchases, allowing the government to generate power without regard for cost or environmental impact.

U.S. officials have been outspoken in their opposition to the new law, which they say would put at risk $10 billion in American investments. It would also shift Mexico away from once-shared climate change priorities, and could force U.S. manufacturers in Mexico to power their factories with fuel oil, instead of cleaner sources.

Mexico’s existing electricity law, introduced in 2013, brought market competition to the sector, allowing the country’s electricity commission to purchase power at relatively low cost and from a range of sources. The cheaper alternatives often come from renewable energy plants owned by private companies, which have pushed less efficient public plants out of the market.

In northern Mexico along the Texas border, for example, foreign companies invested billions of dollars in wind farms. Millions of Mexican homes are powered by natural gas that comes from the United States.

The restructuring would allow the state-owned electricity company, the Federal Electricity Commission, or CFE for its initials in Spanish, to also serve as a regulator. It would also eliminate tenders, allowing CFE to buy electricity from its own plants at higher costs. The government insists that electricity costs for consumers would not rise.

U.S. officials have warned the restructuring could have a dramatic impact on foreign investment, and might violate the U.S.-Mexico-Canada Agreement.

U.S. Trade Representative Katherine Tai raised the law in a letter to Mexico’s economy secretary last month. “While we have tried to be constructive with the Mexican government in addressing these concerns,” she wrote, “there has been no change in policy in Mexico, and U.S. companies continue to face arbitrary treatment and over $10 billion in U.S. investment in Mexico, much in renewable energy installations, is now more at risk than ever.”

“We are concerned that the 2021 electricity law is likely to open the door to endless litigation, creating uncertainty and impeding investment,” U.S. Ambassador Ken Salazar said last week.

Energy consultant Gonzalo Monroy warned that the restructuring “would mark Mexico with a scarlet letter that says Mexico does not honor contracts, it changes the rules, it is arbitrary with inversions.” Such a message, he said, “would create an inertia where no new investment would come.”

López Obrador’s public explanation of the restructuring has barely touched on questions of efficiency, emissions, or prices. He has framed the effort instead in political terms. In a recent book, “Halfway There,” he wrote that a market-driven electricity market was “contrary to the public interest and, perversely, sought to ruin the national electricity industry and leave market dominance in the hands of private companies, mainly foreigners.”

When López Obrador took office in December 2018, CFE produced 54 percent of the country’s electricity. Private companies with clean energy alternatives have since entered the market alongside CFE’s more expensive coal and fuel-based power plants. Private companies now produce 62 percent of Mexico’s electricity, according to the bill to be voted on in Congress.

The restructuring would return CFE to producing at least 54 percent of the country’s electricity. It would rely once again on less efficient, more polluting power plants and fuel oil extracted by the country’s national oil company. Victor Ramirez, a partner at the energy consulting firm Perceptia21Energia, said that it “means rising greenhouse gases by at least 15 percent in a single day.”

Analysts believe the new law would make it impossible for Mexico to meet its pledge to produce 35 percent of electricity from clean sources by 2024. It would also deter investment from manufacturers who have made their own emissions commitments. General Motors, for example, has suggested it will limit its future investment in Mexico if the country doesn’t deepen its commitment to renewable energy.

Manufacturers also worry that the restructuring could make electricity less reliable, posing a threat to Mexico’s substantial manufacturing industry as it attempts to convince U.S. and other companies to relocate operations from China.

López Obrador’s attempts to reshape the energy sector are at the core of his politics. In early 2020, his administration published two decrees creating obstacles to prevent renewable energy from being delivered to the power grid for distribution. The decrees were suspended after being appealed in court.

Then, in February 2021, López Obrador presented a bill proposal in Congress to restructuring the Electric Industry Law. The legislation was quickly passed by a congress controlled by his Morena party. Forty-eight opposition senators took the new law to the supreme court for a constitutional review.

Seven of 11 supreme court justices found the reformed Electric Industry Law to be unconstitutional, but the ruling fell short of the 8-vote supermajority required to reverse the changes.

Private companies and environmental groups have appealed the law. Among their concerns was whether the new law would allow the government to retroactively invalidate their contracts. The court will discuss those appeals in the coming months. The most likely scenario, analysts say, is that appeals will paralyze the law for several years until Congress is reconfigured and the law is changed again.

This Sunday, the House of Representatives will vote on AMLO’s initiative to modify the constitution to allow for the electricity restructuring. Morena no longer has the majorities needed to do so. But because the vote is being held on Easter Sunday, with many lawmakers on vacation, the result is difficult to predict.

It’s the growth of renewable energy that López Obrador sees as among the biggest threats.

“Renewable energy is cheaper than the fuel-based one,” said Montserrat Ramiro, a former commissioner at Mexico’s energy regulator and now global fellow at the Wilson Center. “This administration saw that as a diminishment of CFE because its electricity is more expensive, and they understood that as a loss of sovereignty.”

Analysts expect additional government-generated electricity under the new law would come from fuel oil, which is refined by the national oil company, Pemex.

“They’re going to increase the use of one of the most polluting sources of electricity,” said Tony Payan, director of the Center for the United States and Mexico at Rice University.

Energy has been tied to Mexican identity at least as far back as 1938, when then-president Lázaro Cárdenas nationalized the sector.

Cárdenas created two public monopolies: PEMEX, to develop and sell oil, and the electricity commission, to generate and distribute electricity. The moves fueled pride and a sense of sovereignty for millions of Mexicans, but both entities eventually decayed into inefficient companies rampant with corruption and embezzlement.

“I’ve always thought the initiative [to reform the constitution] was meant for [López Obrador’s] worshipers,” Ramírez said. “This initiative has no technical nor economic logic; it is merely a nationalist topic and a propagandistic one.”

If the constitution is changed, Ramiro said, “the damage would be profound. “Recovering from it could take decades.”

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OK the title of this thread versus the news confuses me.  Sounds like the so-called "reform" got killed.

Letting CFE regulate itself is definitely having the fox watch the hen house.

Quote

Cárdenas created two public monopolies: PEMEX, to develop and sell oil, and the electricity commission, to generate and distribute electricity. The moves fueled pride and a sense of sovereignty for millions of Mexicans, but both entities eventually decayed into inefficient companies rampant with corruption and embezzlement.

Putting it mildly.  

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2 hours ago, Yo1 said:

Wow, especially with the Morena party having the majority votes.  Someone needs to head-off AMLO on his other crazy proposals.

This was a constitutional reform and 2/3 in favor was needed to pass. The supreme court ruled 2 weeks ago about 1/4 of the reform was unconstitutional not even considering many of the parts of it being against the trade agreement between the US and Canada. The parts that would have made it pass with 50 percent AMLO didn't care about he wants the parts that were unconstitutional so the reform was not ratified to be a constitional legal electric reform. The US investors generating electricity in Mexico alone would loose 10 billion USDs and because of the part the supreme court rejected would allow these companies to sue Mexico for the 10 billion which is one of the reasons AMLO would not ratify the reform that he wrote. The trade agreement can also be used to sue Mexico. The supreme court in this case has saved Mexico many billions of dollars so far.

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I did not realize CFE was a "private" company, god forbid I can not think it would be like if it was "nationalized". Can you explain more on who and how it is currently regulated?. Whenever I have had reason to go into their offices they all seem to be doing their own thing with little regards to "us" the customer

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On 4/18/2022 at 2:09 PM, lakeside7 said:

I did not realize CFE was a "private" company, god forbid I can not think it would be like if it was "nationalized". Can you explain more on who and how it is currently regulated?. Whenever I have had reason to go into their offices they all seem to be doing their own thing with little regards to "us" the customer

Private company? After you read these articles and comments you say this. Why?

Private companies that generate electricity legally through the last constutional electrical reform had contracts with CFE to buy electricity from them. CFE bills customers but do not have a monopoly on producing electricity now.

Private electricity producers have been in Mexico and selling electricty to CFE for 20 years.

AMLO wrote a book on how he will get CFE back to having a monopoly generating electricity in Mexico and get rid of the investors and expropiate or close their generating plants, solor farms, windmill areas, pipelines etc. , both national and international investments like it was before.

His book also includes the same plan for petroleum but PEMEX always bought imported light crude to mix to refine Mexico's heavy crude into gas and diesel. Most natural gas they imported and other refined gas and diesel as Pemex could not produce enough for national use especially since Mexico modernized.

This is why the Dos Bocas 18 billion USD refinery. It is state of the art and does more barrels per year than Pemex's 5 old refineries combined. It doesn't require light crude oil to mix with the Gulf heavy crude Mexico has to refine gas and diesel. It could be finished by 2026.

He also plans to get rid of national and international investors involved in oil drilling rigs already in production in the Gulf, exploration in the Gulf, refining and distribution and have Pemex own and control it. Billions and billions of dollars are needed to pay off these investors to add to Pemex's possibly 1/2 trillion dollar augmenting debt. Recently Mexico borrowed 7.8 billion from the IMF and dropped 4 of it into Pemex's debt payment. None of these plans are very substainable plans.

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Somebody must have gotten to him  behind the scenes, becasue on Informador (on line) today he said he will NOT try again for this reform (whew!!) but will leave it to the next President to take up the cause.

Hope that same someone has a REALLY big stick and can continue to wield same.

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21 hours ago, lakeside7 said:

I did not realize CFE was a "private" company, god forbid I can not think it would be like if it was "nationalized". Can you explain more on who and how it is currently regulated?. Whenever I have had reason to go into their offices they all seem to be doing their own thing with little regards to "us" the customer

CFE is owned by the Mexican government.

What the "reform" bill was to eliminate or lower all the private companies that sell power to CFE. It would have cancelled existing contracts. It would have increase "dirty" power production by CFE's coal & gas power plants in front of "clean" energy from private producers.  

AMLO is a believer in that the government should be in control of power, & petroleum.   

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1 hour ago, Mostlylost said:

CFE is owned by the Mexican government.

What the "reform" bill was to eliminate or lower all the private companies that sell power to CFE. It would have cancelled existing contracts. It would have increase "dirty" power production by CFE's coal & gas power plants in front of "clean" energy from private producers.  

AMLO is a believer in that the government should be in control of power, & petroleum.   

so the consumer gets screwed  again--business as usual- socialism from a socialist---HA---well I've adapted---live in the dark and sweat in the summer--It's still better in Mexico than the United States----HA

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https://news.yahoo.com/mexican-president-slams-opposition-defeating-143802271.html

 
Reuters

Mexican president sees 'treason' behind power bill defeat, businesses relieved

Dave Graham and Kylie Madry
Mon, April 18, 2022, 9:38 AM·3 min read
Mexico's President Andres Manuel Lopez Obrador delivers his quarterly report on his government's programs
 
1 / 2

Mexican president sees 'treason' behind power bill defeat, businesses relieved

Mexico's President Andres Manuel Lopez Obrador delivers his quarterly report on his government's programs

By Dave Graham and Kylie Madry

MEXICO CITY (Reuters) -Mexico's president on Monday excoriated opposition lawmakers for voting down a major electricity reform, though business groups were cheered by Sunday's vote, which lifted some of the investor uncertainty clouding the country's energy market.

President Andres Manuel Lopez Obrador decried the defeat of his bid to change the constitution to tighten state control of the power market as "treason," though it could lower the risk of Mexico becoming embroiled in costly trade disputes.

ADVERTISEMENT
 

"Although the law's defeat offered a measure of relief to investors, considerable uncertainty remains for businesses that have been unsettled by a raft of efforts by Lopez Obrador to reinforce state domination of the industry.

The leftist leader had spent months championing the bill he said would protect consumers and make Mexico more self-sufficient. Opponents argued it would raise electricity costs and undermine the country's clean energy commitments.

The opposition united to reject the bill, and Lopez Obrador's National Regeneration Movement and its allies in the lower house of Congress fell well short of the two-thirds majority needed for constitutional amendments.

"I believe that yesterday was an act of treason against Mexico committed by a group of legislators who, instead of defending the interests of the people ... became outright defenders of foreign companies," Lopez Obrador said, speaking at a regular news conference.

 

The legislation would have prioritized state power utility Comision Federal de Electricidad (CFE) over private operators. Business lobbies and Mexico's top trade partner the United States had warned it could violate a North American trade agreement.

Neil Herrington, senior vice president for the Americas at the U.S. Chamber of Commerce, said the bill's defeat was ultimately in Mexico's best interest.

"Lawmakers realized that the proposal, as submitted, would have severely undermined the country's business climate at a time when foreign investment is needed more than ever to generate jobs and growth," he said in a statement.

Mexico's Business Coordinating Council (CCE) applauded lawmakers for showing "great responsibility."

Lopez Obrador submitted the bill last autumn after courts blocked a series of legislative measures and decrees aimed at bolstering the CFE, which relies heavily on fossil fuels from cash-strapped state oil company Petroleos Mexicanos (Pemex)."

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9 hours ago, AlanMexicali said:

https://news.yahoo.com/mexican-president-slams-opposition-defeating-143802271.html

 
Reuters

Mexican president sees 'treason' behind power bill defeat, businesses relieved

Dave Graham and Kylie Madry
Mon, April 18, 2022, 9:38 AM·3 min read
Mexico's President Andres Manuel Lopez Obrador delivers his quarterly report on his government's programs
 
1 / 2

Mexican president sees 'treason' behind power bill defeat, businesses relieved

Mexico's President Andres Manuel Lopez Obrador delivers his quarterly report on his government's programs

By Dave Graham and Kylie Madry

MEXICO CITY (Reuters) -Mexico's president on Monday excoriated opposition lawmakers for voting down a major electricity reform, though business groups were cheered by Sunday's vote, which lifted some of the investor uncertainty clouding the country's energy market.

President Andres Manuel Lopez Obrador decried the defeat of his bid to change the constitution to tighten state control of the power market as "treason," though it could lower the risk of Mexico becoming embroiled in costly trade disputes.

ADVERTISEMENT
 

"Although the law's defeat offered a measure of relief to investors, considerable uncertainty remains for businesses that have been unsettled by a raft of efforts by Lopez Obrador to reinforce state domination of the industry.

The leftist leader had spent months championing the bill he said would protect consumers and make Mexico more self-sufficient. Opponents argued it would raise electricity costs and undermine the country's clean energy commitments.

The opposition united to reject the bill, and Lopez Obrador's National Regeneration Movement and its allies in the lower house of Congress fell well short of the two-thirds majority needed for constitutional amendments.

"I believe that yesterday was an act of treason against Mexico committed by a group of legislators who, instead of defending the interests of the people ... became outright defenders of foreign companies," Lopez Obrador said, speaking at a regular news conference.

 

The legislation would have prioritized state power utility Comision Federal de Electricidad (CFE) over private operators. Business lobbies and Mexico's top trade partner the United States had warned it could violate a North American trade agreement.

Neil Herrington, senior vice president for the Americas at the U.S. Chamber of Commerce, said the bill's defeat was ultimately in Mexico's best interest.

"Lawmakers realized that the proposal, as submitted, would have severely undermined the country's business climate at a time when foreign investment is needed more than ever to generate jobs and growth," he said in a statement.

Mexico's Business Coordinating Council (CCE) applauded lawmakers for showing "great responsibility."

Lopez Obrador submitted the bill last autumn after courts blocked a series of legislative measures and decrees aimed at bolstering the CFE, which relies heavily on fossil fuels from cash-strapped state oil company Petroleos Mexicanos (Pemex)."

As an immigrant with a green card it is illegal for me to comment -all I can do is keep my head down and sweat here in PV----HA---at my age the heat is comforting ---HA

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