Mexico City (AP) —The President of Mexico released details on a proposal on Monday that could squeeze hundreds of private power plants and cause complaints under the Mexico-US-Canada Free Trade Agreement known as the USMCA. Did. A constitutional amendment presented by President Andrés Manuel Lopez Obrador has canceled contracts for 34 private power plants to
Mexico City (AP) —The President of Mexico released details on a proposal on Monday that could squeeze hundreds of private power plants and cause complaints under the Mexico-US-Canada Free Trade Agreement known as the USMCA. Did.
A constitutional amendment presented by President Andrés Manuel Lopez Obrador has canceled contracts for 34 private power plants to sell electricity to the national grid. The plan declares another 239 private plants that sell energy directly to Mexican corporate customers as “illegal.”
It also cancels many long-term energy supply contracts and clean energy priority purchase schemes, often affecting foreign companies.
Private natural gas power plants are almost in the last row than government coal-fired power plants, seeking the right to sell electricity to the grid, even though they produce electricity about 24% cheaper. increase. Government-run plants that burn dirty fuel oil take precedence over private wind and solar power plants.
This contradicts the promise of guaranteeing “at least” 54% market share for government utilities and 46% for private companies.
“Private companies enter the market at a rate of 46%, are never nationalized, and even a single screw or nut is not nationalized,” said Energy Secretary Rossio Nare. ..
However, Nare did not explain what is the difference between effectively closing a private power plant and nationalizing it. Both are of zero value to the owner and are impossible to move.
Moreover, it is clearly up to the federal power commission, the state-owned utility, to decide whether to exceed the “at least” 54% market share.
The president’s bill, which requires a two-thirds majority to pass in Congress, now has older power plants, more expensive to operate, and more pollution.
Lopez Obrador is an idol of a state-owned enterprise. In addition, he needs government utilities to burn all the excess fuel oil he has produced by the expanded Mexican oil refinery. Fuel oil, a by-product of gasoline and diesel refining, becomes dirty when burned.
As a result, the president was keen to pressure the former ruling Institutional Revolutionary Party, which has the necessary votes to pass the reform, to support it. This is a long-term bid. It was the Institutional Revolutionary Party that pushed the privatization reforms in 2013, with some key members saying they would not vote for a return to the government-controlled electricity sector.
“If this constitutional amendment is not passed, these (private) companies will take over all of the electricity market and we can see what is happening now in Spain, where electricity prices are passing through the roof.” Said Lopez Obrador. ..
Ironically, Nare has displayed a graph showing that so far this year, Mexico’s electricity prices have barely risen under the current partially privatized scheme.
Many of the private factories were built by foreign investors under the 2013 energy reforms that the president wants to roll back, and analysts say these foreign companies guarantee equal treatment for foreigners. States that complaints can be filed under USMCA regulations prohibiting support for local or governmental businesses.
A private BBVA research firm said the president’s plan “will generate complaints under the USMCA.”
“Regarding the USMCA, the proposed reforms violate at least Chapter 14 (Investment) and Chapter 21 (Competition Policy),” the company wrote in an analysis of the plan.
Oddly, the president’s plan doesn’t seem to focus on what many observers say is one of the real flaws in today’s electrical systems: because of the power they generate by private companies. The fact that you don’t have to pay much of the transmission costs to.
However, it abolishes all regulations, competition and oversight bodies in the power sector and integrates them into the Federal Power Commission, allowing it to determine whether its own practices are fair.
“The plan closes the door to competition and, if approved, will lead to shortages, power outages, and higher rates of Mexican families than ever before,” said the Mexican Employers Federation, a business group. “.
A bill sent by Lopez Obrador to Congress earlier this month declared lithium a “strategic mineral,” and future exploration and mining for the government, despite the lack of state-owned companies in Mexico to produce lithium. I reserve.
The move is likely to put Mexico’s only privately exploited mine, which is scheduled to begin production in 2023, into the hands of a Chinese lithium company.