Mexican court blocks law favoring state electricity plants

MEXICO CITY — Even sooner than critics had expected, a court in Mexico issued an injunction Thursday to block a new law that favors government-owned power generation over cleaner private electrical plants.

The law went into effect Tuesday, and within two days the court granted an injunction to block it. The ruling was sought by a company that operates a 160-megawatt wind farm in the southern Pacific coast state of Oaxaca.

President Andrés Manuel López Obrador has said the law is meant protect government-owned fossil-fuel plants against what he call unfair competition from private wind, solar and natural gas-fired power plants.

But investors, many of them foreign, say it violates the U.S.-Mexico Canada free trade pact and Mexico’s commitments to cut carbon emissions. They claim it also creates a de-facto government monopoly, hurts competition and will make Mexicans buy dirtier, more expensive electricity.

“There is a societal and public interest in suspending the law,” the Second Administrative District Court wrote in the ruling. It said the action aims to protect “the continuity of public policies” that were enacted in 2013 “to promote sustainable development, competition in the electrical sector and protect the environment.”

Many wind, solar and gas-fired power stations were built in Mexico by foreign companies following the previous administration’s energy reform that López Obrador opposed. The president is a string supporter of state-owned enterprises and fossils fuels.

The new law says electricity must first be bought from government-owned generating plants, which largely run on fossil fuels like coal, oil and diesel. If any demand remains, power will be purchased from renewable and private natural gas-fired plants.

The bill has drawn complaints from private business groups and U.S. investors, with the U.S. Chamber of Commerce saying in February the law “would directly contravene Mexico’s commitments” under the trade agreement, known as the USMCA, which places strict limits on how much a government can favor its own firms over outsiders.

López Obrador wants to defend state-owned firms and argues that Mexico should become energy self-sufficient, a conviction he says was strengthened after winter storms in Texas temporarily cut off supplies of imported natural gas early this year.

With electricity use down during the pandemic, Mexico’s state-owned power company, the Federal Electricity Commission, faces declining revenue and increasing stocks of fuel oil it has to burn in power plants, though the dirty fuel has lost customers worldwide. The commission also has come under pressure to buy coal from domestic mines.

The commission announced Thursday it would seek bids for construction of six new gas-fired power plants totaling about 4.3 megawatts, which it said were intended to improve the country’s energy security.