MEXICO CITY (AP) — Mexico’s Senate passed an electrical energy bill that favors government-owned generating plants that largely run on fossil fuels Tuesday, putting renewable and private plants at the back of the line for purchasing power.
The bill has drawn complaints from private business groups and U.S. investors, some of whom backed cleaner gas and renewable power plants in Mexico. Some analysts warn the measure could violate the U.S.-Mexico-Canada free trade pact.
The Senate must still vote on some objections, but President Andrés Manuel López Obrador appeared to have the votes to push the bill through. It passed earlier in the lower house of Congress.
The 68-58 vote in the Senate was widely expected, given López Obrador’s insistence that Mexico should become energy self-sufficient, after winter storms in Texas temporarily cut off supplies of imported natural gas last month.
The U.S. Chamber of Commerce said in February that Mexico’s attempts to limit private electricity generation would violate the trade agreement, known as the USMCA.
The chamber said giving priority in electricity purchases to older, more polluting, state-owned power plants “would directly contravene Mexico’s commitments” under the trade agreement.
Neil Herrington, the chamber’s Senior Vice President of the Americas, said in a statement that the bill could re-instate a government monopoly, adding “these changes would significantly raise the cost of electricity and limit access to clean energy for Mexico’s citizens.”
“Unfortunately, this move is the latest in a pattern of troubling decisions taken by the Government of Mexico that have undermined the confidence of foreign investors in the country,” Herrington wrote.
Mexico’s Supreme Court had earlier ruled against López Obrador’s previous attempt to block permits for renewable power plants, and the electricity bill could also wind up in court.
Interior Secretary Olga Sánchez Cordero said the Supreme court ruling applied only to a 2020 executive order, and suggested the administration would wage a new court battle over the bill passed Tuesday.
The new bill would require that electricity be bought first from state-owned hydroelectric plants and those that burn coal, diesel and fuel oil. It puts cleaner private natural gas, wind and solar plants — many built with foreign investment — last in line for electricity purchases. The private and renewable energy plants were encouraged by López Obrador’s predecessors in order to reduce carbon emissions.
With electricity use down during the pandemic, Mexico’s state-owned power company, the Federal Electricity Commission, faces declining revenue and increasing stocks of fuel oil it has to burn in power plants; the dirty fuel has lost customers worldwide. It has also come under pressure to buy coal from domestic mines.
López Obrador sought in an executive order in 2020 to shore up the government company by limiting permits to bring online other plants, including some wind and solar facilities, many of which are already built. The president claims that green-energy incentives give those plants an unfair advantage over the state utility.
But the Supreme Court ruled that many of the provisions of the 2020 executive order would unfairly affect competition in the sector. Some of the rules had been put on hold previously. The case was brought by the government’s own anti-monopoly commission.
Mexican industries have long been hobbled by the country’s relatively expensive and unreliable electricity supply. A 2013 legal overhaul opened the way for private companies, many of them foreign, to invest more heavily in the sector.