Mexican lower house lawmakers on Sunday began debating a controversial proposal by President Andres Manuel Lopez Obrador to restore the state’s monopoly over the electricity industry.
Dozens of lawmakers are expected to speak during what is likely to be a lengthy process. A same-session vote is planned for the bill, which comprises constitutional amendments giving state utility Comision Federal de Electricidad, or CFE, at least 54% of the market and capping private participation.
The proposal is expected to fall short of the two-thirds majority required to change the constitution. Lopez Obrador’s ruling coalition lost some ground in the lower house of congress following last June’s midterm elections and opposition lawmakers have refused to back the bill.
Critics including industry representatives have said the legislation embraced fossil fuels and would cripple the country’s energy future by blocking private investment. Washington has also warned the bill would violate its free trade deal with Mexico and put more than $10 billion in U.S. investments at risk.
Lopez Obrador has made energy a central pillar of his presidency as he seeks to overhaul the CFE and state-run oil company Pemex, which has become the world’s most indebted oil firm as it oversees a decline in production. He has used his daily press conferences to question the patriotism of opposition lawmakers who are supporting foreign companies that have entered the industry.
On Sunday, the head of the Institutional Revolutionary Party, or PRI, Alejandro Moreno said opposition parties were uniting to defeat the bill backed by the ruling coalition, calling it a danger to the Mexico’s future. “Today they will have their most monumental and biggest defeat,” Moreno said.
The president has said the bill is part of his efforts to keep consumer energy prices down at a time that global prices have spiked due to Russia’s invasion of Ukraine and as countries look for alternative sellers. He’s held firm to his plans amid a flurry of trade and climate diplomacy on the part of U.S. Ambassador Ken Salazar and John Kerry, the U.S. presidential envoy for climate.
Private investment in power projects have slowed to a trickle due to concerns that Lopez Obrador could pass a constitutional reform. The defeat of the bill could mark an inflection point that could lead to increased investment in the sector in the coming years, said Severo Lopez Mestre, an energy consultant and former high-level official who implemented early reforms to open up the power industry to private investment two decades ago.
“If Lopez Obrador can’t change the constitution, no one can. Now, the level of uncertainty will come down,” Lopez Mestre said in an interview. “Mexico will require investment since everything has fallen behind. What is at issue is not just Mexico, but the competitiveness of the North American hemisphere.”
Still, Lopez Obrador’s government could continue to discourage investments. It has declined to renew the contracts of foreign companies such as Iberdrola, miring both companies and the state in court battles. Last week, the Supreme Court upheld another law that gave state utility CFE permission to distribute its energy before cheaper private alternatives.
David Enriquez, a partner at Goodrich Riquelme y Asociados law firm, said legal maneuvers filed by private companies against that law will continue to be fought in court.
“The injunctions remain in limbo,” he said. “Some collegiate courts can decide in favor of companies, others against, and it creates a dispersal of decisions.”
