Mexico's top court endorses disputed power sector law reform

Controversial changes to Mexico’s Electricity Industry Law (LIE) pushed by president Andres Manuel Lopez Obrador were found to be constitutional by the country’s Supreme Court on Thursday.

Modifications to the LIE, introduced in March 2021 to give preference to state-owned utility CFE over private power generators, survived a tight vote by the 11-judge panel. At least a two-thirds majority, or 8:3, would have been enough to declare the law unconstitutional, but up to seven judges kept facing the opposition of four on key articles.

Some of the contentious parts of the new LIE include the change to the dispatch order in favour of CFE’s power plants, which would be able to upload their not always clean electricity first. Privately-owned wind and solar farms, and gas-fired power plants are relegated to the end of the dispatch queue.

The new law also redesigned the clean energy certificates (CELs) scheme, which was established in Mexico’s 2013-2014 energy reform to incentivise investments in new wind and solar projects. The new rules have allowed CFE’s old clean energy plants to sell CELs as well, something experts argued would cheapen their value on the market.

The Court also debated whether the law hurt free competition and the right to a healthy environment,

After the Supreme Court’s ruling, injured parties can seek legal auction in lower courts.

In his reaction to the Court’s decision on Thursday, US Ambassador to Mexico Ken Salazar said that “the 2021 electricity law as enacted will open the door to endless litigation by private companies and other stakeholders if the 2021 law as written is implemented through regulatory action”.

“As the Mexican legislature continues to deliberate the energy measures before it, we hope that the legal framework that emerges will support the creation of a North American clean energy powerhouse, protect current and future U.S. business investments in Mexico, and support the integration of U.S.-Mexico supply chains,” Salazar said in a statement posted on the Embassy’s website.

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