Mexican government facing international criticism over moves to exert more state control over power sector
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Combustion Industry News Editor
The federal government of Mexico has “rammed through” sweeping changes to the country’s electricity market that private utilities fear will reduce their ability to operate, according to a report from the Financial Times. While his predecessor Enrique Peña Nieto set up an independent market regulator in 2014, current President Andrés Manuel López Obrador’s administration has now brought the sector under state control, meaning that the government can determine who can generate power, where they can do it, and how much they can produce. The passage of the new legislation – which the government has said is necessary in the context of the COVID-19 pandemic – has been controversial, with the head of the National Commission for Regulatory Improvement, which needs to approve legislation, resigning after it went through. Although the COVID-19 justification is that grid stability is threatened by too much renewable energy, this appears somewhat tenuous – an FT report in December last year had already highlighted the government’s plans to limit private enterprise’s role in the power sector, increasing transmission costs for private companies, particularly those involved in renewable energies. In addition, the measures go beyond addressing that particular justification. Pablo Zárate, a specialist energy consultant interviewed by the FT, has said that the government is “using Covid as an excuse to try to increase their powers and achieve the political objective of control of the system,” labelling the move “a tremendous power grab” (which in this case could be said to be verging on the literal). The move will worry companies such as Iberdrola, Naturgy, AES, Sempra, Enel, Engie and Vestas, all of which have invested in Mexico in recent years, with one executive describing the change as “immense for our industry…if it goes through, it’s the end. We will do our best to contain it.” This may be a reference to the possibility that the government’s actions violate international treaties, which could be a means through which private companies stymie the government’s intentions. For his part, President Lopez Obrador has accused the foreign press of being the stooges of big business, and attacked foreign companies, saying “If we don’t put things in order, things will stay the same. They’ll continue seeing Mexico as a land of conquest…Foreign companies came to plunder.” Numerous ambassadors have already raised objections with the Mexican government, and the rather fluid situation may have more twists to come.