AMLO aims to ease investors’ concerns over Mexico’s electricity overhaul

Mexico City, Mar 3 (efe-epa).- Mexico’s president on Wednesday sought to ease investors’ concerns over an electricity sector overhaul that strengthens the state-owned power utility at the expense of private and foreign generators.

Andres Manuel Lopez Obrador, popularly known as AMLO, made his remarks a day after the Senate gave final congressional approval for the overhaul.

“We don’t want to expropriate just to expropriate. We haven’t expropriated anything since I’ve been in (office). I say this so our adversaries, who aren’t our enemies, don’t instill fear in investors now with the electricity reform,” the leftist head of state said at his regular morning press conference at Mexico City’s National Palace.

AMLO made his remarks a day after the Senate passed a bill that he had introduced to Congress to favor the Federal Electricity Commission (CFE) over private companies, particularly foreign-owned generators of renewable energy.

The main change will be a modification of the dispatch rules under which electricity is fed to the power system.

Under the new regime, instead of the cheapest energy being used first, the Cenace power-grid operator will initially have to take electricity from hydroelectric power plants owned by the CFE.

Next in order of priority will be power from the CFE’s nuclear, geothermal, combined cycle and thermoelectric power plants, followed by solar and wind power stations owned by private entities and finally electricity from privately owned combined cycle power stations.

The overhaul, which effectively scraps key parts of a 2013 energy reform that elevated the role of private and foreign investors in Mexico’s electricity sector, also requires the retroactive review of contracts that previous governments signed with independent power producers.

AMLO acknowledged Wednesday that he introduced the electricity overhaul – submitted to Congress on Feb. 1 – because foreign companies had refused to renegotiate contracts his administration regards as one-sided.

“There was no response, and that led me to submit the bill to modify the (Electricity Industry Law) so we have a legal framework and we have better conditions,” the president said.

Now that the bill has passed both houses of Congress, he said he intends to talk with a Spanish company and 10 other private entities.

“We’re going to seek out agreements in the sense that we want to keep the contracts,” he said, though adding that those accords must be adapted to the country’s new political and economic reality.

The electricity sector overhaul also provides that Clean Energy Certificates (CELs) can be granted to older clean power generation facilities – mostly hydroelectric plants – operated by the CFE.

That provision has sparked a backlash from critics, who say it will reduce the value of the CELs, discourage the development of new solar and wind projects and prevent Mexico from fulfilling its Paris Agreement commitment to generate 35 percent of its electricity from clean sources by 2024.

AMLO has countered that criticism by pledging to upgrade the CFE’s older hydro plants and make them more efficient.

“I’ll be unveiling a modernization plan for the hydroelectric plants. We’re going to change turbines to produce more clean energy at a lower cost. We’re going to start with 14 hydroelectric power stations,” he said.

The overhaul has received congressional approval after a year in which the CFE sustained a net loss of more than $3.7 billion due to the depreciation of the Mexican peso and the coronavirus pandemic.

Congress’ Public Finance Studies Center (CEFP) estimates the reform will cause the CFE’s net profits to rise to as much as 135.6 billion pesos (nearly $6.5 billion).

But the CEFP also warns that the overhaul puts at risk more than 451 billion pesos in investments in 105 private renewable energy projects.

“We’re not against business leaders. We’re against corruption,” AMLO said. EFE-EPA