Mexican Supreme Court Issues An Injunction of the SENER Policy
On June 22, 2020, Mexico’s independent antitrust regulator (“COFECE”) filed a legal claim (controversia constitucional) with the nation’s Supreme Court arguing that the Ministry of Energy’s (“SENER”) Agreement setting forth the Policy of Reliability, Safety, Continuity, and Quality of the National Electric System (“Policy”), as published in the Official Gazette of the Federation on May 15, 2020, not only violates articles 16, 28, and 133 of the Mexican Constitution, but also Mexican laws applicable to the energy sector. COFECE asks the Supreme Court to clarify the limits of SENER’s authority “concerning the constitutional principles of competition when [SENER] issues a regulation that severely affects the competitive dynamic[s] of a market.” On June 29, 2020, the Supreme Court agreed with COFECE granting an injunction against the “effects and consequences” of the Policy until the matter is definitively resolved.
COFECE has consistently raised concerns about and spoken out against the various actions taken by the López Obrador Administration affecting the regulatory framework applicable to renewable energy projects, including the independent system operator’s (“CENACE”) April 29, 2020 decision to indefinitely suspend all legally mandated pre-operation tests for renewable energy projects and the Policy. In a statement published on COFECE’s website last Monday, COFECE unequivocally stated that:
“[The Policy] severely affects the economic structure of the electricity sector, as it eliminates any possibility for its operation in conditions of competition and efficiency, as well as under the terms set forth in the current national regulatory framework for this sector. Hence, the contested Policy compromises both the open and non-discriminatory access to transmission and distribution networks (an essential input in this industry), as well as the economic dispatch criterion that governs the operation of the wholesale electricity market; furthermore, it grants advantages in favor of certain participants while reducing the ability of others to compete, forfeits efficiency and establishes barriers to entry in electricity generation.”
This appears to be the culmination of legal actions against the López Obrador Administration’s attacks on renewable energy projects.
In response to the Supreme Court’s decision, during his daily briefing President López Obrador stated that his administration will respect the Court’s decision but will continue to defend the public interest. Moreover, López Obrador stated that his administration will speak with each of the companies operating in Mexico’s energy sector about the national grid’s security and reliability. The President went on to state that his administration’s intention was not to put fuel oil ahead of renewable energy, but rather to seek that the competent authority investigate fraud he believes is evident in the pricing structures and rising energy prices for individuals. Stating that his administration will not be complicit in the cover up of corruption, López Obrador also intends to pursue legal claims against private companies he believes were fraudulently awarded public contracts. Energy Minister, Rocío Nahle, Tweeted that the reliability and security of the national grid is above any public or private economic interest