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Mexican Court Orders a Definitive Suspension of the Enforcement of SENER and CENACE Measures

On Wednesday, June 10, the Mexican court specialized in economic competition issued an order granting the definitive suspension of the Ministry of Energy’s (“SENER”) Agreement setting forth the Policy of Reliability, Safety, Continuity, and Quality of the National Electric System (“Policy”) and the independent system operator’s (“CENACE”) preoperative testing restrictions. This means that neither the Policy nor CENACE’s restrictions may be further pursued or enforced until a final judicial order on the matter is issued (“Order”). The Order is one of a growing number of judicial orders against the López Obrador administration’s recent attempts to restructure the Mexican electricity market to the detriment of renewable energy producers and outside of the established regulatory and legal parameters.

The most recent judicial order was issued on Friday, June 12. Here the court accepted Tampico Solar’s request for a provisional suspension of the application of a new Federal Electricity Commission’s (“CFE”) tariff structure applicable to “legacy renewable and cogeneration energy contracts” (those contracts executed prior to the 2013 Energy Reforms). CFE had just published the new tariff structure in the Official Gazette of the Federation on Wednesday, June 10, 2020. Although Tampico Solar’s request was granted, the judge did not issue a blanket injunction on the applicability of the new CFE tariff structure.

Notwithstanding the above, the López Obrador administration continues its public offensive against renewable energy projects and the companies that develop them. During his Friday, June 12 press conference, President Andrés Manuel López Obrador confirmed that his administration will continue the legal battle to enact these changes. López Obrador claimed that companies went too far and received far too many advantages from prior administrations, including, among other things, preferential distribution that dispatched energy produced by renewable energy plants ahead of energy produced by CFE plants because “the intent was to bankrupt CFE”. Additionally, Energy Minister, Rocío Nahle, confirmed that SENER intends to appeal the Order and continue to defend the López Obrador administration’s policies for the benefit of the Nation. In this regard, a SENER blog post dated June 11, states that SENER respects the rule of law and promotes the interests of all Mexicans. As such, SENER will appeal the Order arguing that the Constitution establishes that the planning and control of the national grid is the sole and exclusive right of the Nation. Moreover, the transmission and distribution of energy are considered by the Constitution as strategic areas and in the public interest. The SENER post concludes by stating that no economic interest will prevail over the Nation’s interests. Based on SENER’s post, the authority vested in the Nation by the Constitution will be exercised by the Federal Government on the Nation’s behalf.

So far, the López Obrador administration has complied with the various judicial orders. This bodes well for the rule of law, especially since the López Obrador administration has expressed its intention to exhaust legal avenues. However, the real test may come as the López Obrador administration’s measures its possible response in the event it faces one or more final, unappealable, judicial rulings that possibly dismantle some of the various measures taken against renewable energy.

One final thought: none of the public statements made by the López Obrador administration have addressed how long the various measures may remain in place. SENER and CENACE have cited the COVID-19 pandemic as the reason for the Policy and suspension of preoperative testing. However, Mexico has begun to lift restrictions and stay-at-home orders, and based on his belief that the worst of the COVID-19 pandemic has passed, López Obrador is urging citizens to go outside without fear, albeit while maintaining physical distance and hygiene protocols. Given this sentiment, it will be interesting to see if the López Obrador administration will continue to defend the measures it justified using the COVID-19 pandemic and whether a time frame applicable to the measures will be established.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 168
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About this Author

Loana Martin Energy & Natural Resources Attorney Squire Patton Boggs Washington DC
Senior Associate

Loana Martín is a senior associate in the Energy & Natural Resources Practice Group in the Washington DC office. Loana focuses her practice on corporate transactions in the energy and infrastructure sectors, developing natural gas pipelines, solar power plants and other major infrastructure projects in the US and Latin America.

Her experience includes advising clients on the structure of project development vehicles, and negotiating and drafting shareholders’, joint venture, joint development, merger, acquisition, divestiture and services agreements, as well as preparing related...

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