Mexico Judicial Battle Over Electricity Regulations Intensifies

On 11 June a Mexican federal judge ordered the indefinite suspension of the new regulations for the national electricity market, recently introduced by the government, pending a final ruling on whether these are lawful.
Mexico Judicial Electricity Regulations

Analysis:

The new regulations drafted by the energy ministry (Sener) have been denounced by private electricity companies and civil society organisations as an illegal attempt to restrict private participation in the electricity sector and limit renewable electricity production in the country. The issue has become a major bone of contention with the government led by President Andrés Manuel López Obrador, with business groups complaining that it is undermining investor confidence while other civil society organisations warn that it is jeopardising Mexico’s sustainable development. The government denies this, but the ruling is the latest sign that government could lose this argument in the courts.

  • Various energy firms have filed legal challenges against the new regulations in the courts. These are now making their way through the court system, where it increasingly looks like the government is going to face a costly and potentially highly damaging battle.
  • Judge Rodrigo de la Peza from the specialised federal court on economic competition issued the order yesterday after accepting to hear a formal complaint filed by Defensa Colectiva AC, a civil grouping. De la Peza agreed with Defensa Colectiva’s argument that the new regulations introduce market entry barriers targeting renewable electricity producers that could undermine fair competition in the market, in violation of competition laws.
  • The judge ordered the indefinite suspension of the application of the regulations while he determines whether these in fact violate competition laws. This is the second court ruling that suspends the implementation of the regulations pending evaluation after another federal judge issued a similar order last month. But while the previous order only benefited the plaintiff that had filed the complaint, De la Peza’s order implies the general suspension of the new regulations until he determines whether these are lawful. Defensa Colectiva’s lawyers said that the ruling allows renewable energy producers to continue selling electricity to the national grid until a final ruling is reached.
  • Hours after De la Peza’s order, Sener issued a statement announcing its intention to appeal against it. “Sener will fight this resolution” the statement says, arguing that the constitution gives the government the prerogative to control and regulate the national electricity system to ensure its effective functioning, given that it is considered an essential and strategic service. It also argues that “no economic right can prevail over the public and national interest”. The statement concludes by saying that Sener will defend the attributions that have been conferred on it by the constitution.
Looking Ahead:

Defensa Colectiva’s lawyers have said that they expect the government to appeal all the rulings against the new regulations; and that it is likely that the case would have to eventually be resolved by the supreme court. But they have warned that reaching a resolution may take months.

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