Mexico President Andrés Manuel López Obrador has high hopes of changing the rules of the game in the electric power sector, but his proposal likely won’t be voted on in Congress until early next year as the reform is studied by legislators.
The reform, if passed, would modify the constitution to eliminate upstream oil and gas regulator Comisión Nacional de Hidrocarburos (CNH). It also would eliminate midstream, downstream and electricity regulator Comisión Reguladora de Energía (CRE). Independent power grid operator Centro Nacional del Control de Energía (CENACE) would be absorbed by state-owned power company Comisión Federal de Electricidad (CFE), while CFE would win a mandate to supply 54% of electricity generated in the country.
The electric sector reform “will likely face lengthy debate,” said analysts at political risk agency Eurasia Group. “President López Obrador’s first legislative priority of the second half of his tenure appears increasingly unlikely to be voted on in the remainder of the year due to several political and procedural difficulties.”
These complications include the need to push through next year’s budget. Legislators also “seem to favor a broad debate before the reform is voted on.” Open discussion sessions on the bill simultaneously in the lower house and the senate are expected to last until at least mid-November.
“López Obrador will try to have the bill voted earlier and pressure legislators from his party and opposition to vote on the bill this year,” the Eurasia analysts said. “Moreover, he will be unwilling to alter the core of the reform, all of which means that it remains unlikely that the reform will be approved.”
For the reform proposal to pass, López Obrador’s Morena party would need to pick up 53 votes from opposition legislators in the lower house, and at least 10 in the Senate. Mexico’s courts have blocked previous attempts by the executive branch to change rules in the energy sector.
Press reports indicate that Morena lower house members may seek to get the bill to a vote by December.
The business sector in Mexico remains firmly opposed to the proposed changes. On Monday, business chamber Consejo Coordinador Empresarial (CCE) said the government was “using nationalism as a pretext to go against the rule of law.”
CCE called the counter reform “an attack on a system that has taken us many years to create and on the legal precepts that protect us against arbitrariness and authoritarianism.” It also called for “respectful dialogue” and not “provocation and polarization.”
The CCE represents 2,000 trade groups that make up 80% of Mexico’s gross domestic product.
During his press conference on Tuesday morning, López Obrador said Mexicans “needed to be well informed about the electric power reform.” He said that “we will see whether legislators are representatives of the people” or whether they are representatives of their parties “or worse still, of companies.”
Mexico City consultant David Rosales told NGI’s Mexico GPI that in terms of natural gas, the reform would mean “less demand from the electricity sector, fewer projects, and lower growth overall because this would put a brake on Mexico’s competitiveness.”
In a recent column for NGI’s Mexico GPI, Gadex consultant Eduardo Prud’homme said the counter reform “seeks not only changes to the constitution to undo some of the structural changes of 2013 -2014, but also eliminates many of the private participation schemes established in 1992.”
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