MEXICO CITY: Mexico’s president on Monday presented details of a proposal that is likely to squeeze hundreds of private power generation plants and more under the Mexico-US-Canada free trade agreement known as the USMCA.
Constitutional reform presented by President Anders Manuel Lepez Obrador would rescind contracts under which 34 private plants sell electricity to the national grid. The plan declares illegal another 239 private plants that sell energy directly to corporate customers in Mexico.
It would also cancel many long-term energy supply contracts and clean-energy preferential purchase schemes, which often affect foreign companies.
This puts private natural gas plants ahead of only government coal-fired plants for the right to sell electricity to the grid, despite the fact that they produce electricity about 24% more cheaply. Government-run plants burning dirty fuel oil will have priority over private wind and solar plants.
It guarantees government utilities a market share of at least 54%, in contrast to a promise to reserve 46% for private companies.
Energy Secretary Rocio Nahle said this means private companies are going to come into the market with 46% percent, they are not going to be nationalized at all, nor screws or nuts.
But Nahle did not explain the difference between effectively closing down a private power plant and nationalizing it. Both would have a zero value for the owner and would be impossible to move.
Beyond that, it will obviously be up to the state-owned utility, the Federal Electricity Commission, to determine if it wants to go for at least a 54% market share.
The president’s bill, which requires a two-thirds majority to pass in Congress, is meant to shore up the finances of the federal utility, which currently produces about 38% of the nation’s electricity because its plants are older, Difficult to drive. are more expensive and are more polluting.
Lpez Obrador considers state-owned companies as its role models; In addition, it requires a government utility to burn all excess fuel oil produced by Mexico’s oil refineries, which it has expanded. No one wants more fuel oil, a by-product of refining gasoline and diesel, which gets dirty when it burns.
So the president was eager to pressure the old ruling Institutional Revolutionary Party, which has swing votes, to pass reform to support it. It’s a long-winded bid: it was the Institutional Revolutionary Party that spearheaded the 2013 privatization reform, and many prominent members say they will not vote for a return to the government-dominated power sector.
If this constitutional reform is not passed, these (private) companies will take over the entire electricity market and we will get what is happening right now in Spain, where electricity rates are going through the roof, said Lepez Obrador .
Ironically, Nahle displayed a graph showing that, so far this year, Mexico’s electricity prices have increased little under the current, partially privatized plan.
Several private plants were built by foreign investors as part of the 2013 energy reform that the president wants to withdraw, and analysts say those foreign companies can file complaints under USMCA rules that treat foreigners equally. guarantees, and refuses in favor of local or government. Company.
The private BBVA research firm said the president’s plan would generate complaints under the USMCA.
With regard to the USMCA, the proposed reform violates at least Chapter 14 (Investment), and Chapter 21 (Competition Policy), the firm wrote in its analysis of the plan.
Oddly, the president’s plan does not focus on what many observers say is one of the real drawbacks of the current electrical system: the fact that private firms incur high transmission costs for the electricity they produce. have to pay. No need to pay. .
But it would eliminate all regulatory, competition and oversight agencies in the power sector and link them to the Federal Electricity Commission, which would then be able to decide whether its own practices are justified.
The Federation of Mexican Employers, a business group, said: The scheme closes the door to competition and it is clear that if approved, in the short term it will lead to shortages, blackouts and sometimes higher rates for Mexican households. will give birth to will give
The bill, which Lépez Obrador sent to Congress earlier this month, declares lithium a strategic mineral and reserves future exploration and mining for the government, despite the fact that Mexico produces lithium. There is no state-owned company capable of doing this.
The move is expected to leave Mexico the only privately exploited mine whose production is expected to begin in 2023 at the hands of a Chinese lithium company.
Disclaimer: This post has been self-published from the agency feed without modification and has not been reviewed by an editor
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