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20 July 2020
On 15 May 2020 the Ministry of Energy (SENER) published the Policy of Reliability, Security, Continuity and Quality of the National Electric System (SEN),(1) a regulation which, among other things, tacitly incorporates competition barriers for intermittent clean energy power plants in Mexico.
Under the Electricity Industry Law and the Organic Law of the Federal Public Administration, SENER is responsible for establishing, conducting and coordinating the national energy policy regarding electricity.
The new reliability policy allegedly aims to:
However, the policy does not provide sufficient technical grounds to justify said objectives, which some experts consider could be achieved through other alternatives, so it seems to be based mainly on the government's determination to strengthen the position of the Federal Electricity Commission (CFE). The policy grants the CFE several advantages in the market and restricts the participation of private generators, which has sparked concerns among the sector regarding the future of their investments.
SENER's reliability policy was issued in a hurry and under irregular conditions which showed the government's intention to avoid public consultation – a mandatory requirement for regulations which may affect the general population. The policy directly affects renewable energy projects by making the following modifications to the current legislation, among others:
These aspects of the reliability policy are expected to affect competition and open participation in the electricity industry for the private sector. Further, they grant the CFE numerous advantages in the Mexican electricity market, to the detriment of renewable energy projects and a healthy electricity market.
The reliability policy will have severe consequences for generation projects, mainly in the following areas:
Private sector participants can invoke the following defence mechanisms against the reliability policy:
To date, private sector participants have initiated more than 70 amparo actions against the reliability policy.
Independently, determined governmental entities have the right to present special challenges against the policy, and some have already initiated them, as described below.
The Federal Economic Competition Commission (COFECE) is an autonomous organ whose purpose is to promote, protect and guarantee free market participation and economic competition, as well as to prevent, investigate, combat, prosecute, punish and eliminate monopolies, monopolistic practices, illicit concentrations, barriers to free concurrence and economic competition and other restrictions to the efficient operation of the markets.
In this regard, COFECE can analyse, identify and order or undertake measures to eliminate barriers to competition, including:
On 22 June 2020 COFECE filed a constitutional procedure, requesting the Supreme Court of Justice to confirm, among other things, whether:
The Supreme Court of Justice granted a suspension in COFECE's favour, leaving the reliability policy without effect until the court has definitively resolved the constitutional procedure, which may take up to 12 months. Until then, the relevant measures in the policy do not apply to participants in the Mexican electricity market.
Greenpeace, along with the Mexican Centre for Environmental Law, has also filed an amparo action against the reliability policy, seeking to:
On 24 June 2020 Greenpeace also obtained the definitive suspension of the policy. As such, the relevant measures included in the policy do not apply until the corresponding administrative procedure, which began in May 2020, has been concluded.
For further information on this topic please contact Guadalupe Esparza Sánchez or Maria Fernanda Solis at Ramos, Ripoll & Schuster by telephone (+52 55 1518 0445) or email (firstname.lastname@example.org or email@example.com). The Ramos, Ripoll & Schuster website can be accessed at www.rrs.com.mx.
(1) Acuerdo por el que se emite la Política de Confiabilidad, Seguridad, Continuidad y Calidad en el Sistema Eléctrico Nacional, available here.
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