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LatinNews Daily - 26 January 2022

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MEXICO: CFE hits back at electricity reform critics

On 25 January, Mexico’s state-run electricity firm Comisión Federal de Electricidad (CFE) responded to criticisms of President Andrés Manuel López Obrador’s proposed electricity reform, which is currently being debated in congress.

Analysis:

The CFE was responding to statements issued by the Mexican automobile industry association (Amia) and influential private sector lobby the Confederación Patronal de la República Mexicana (Coparmex) on 24 January. Criticisms of the controversial reform have intensified in the past week, suggesting that López Obrador has his work cut out if he is to secure the support needed to push it through congress.

  • The CFE, which would gain 54% control of the domestic electricity market under the reform, issued a statement saying the criticisms formed part of a “negative propaganda campaign” and were “charged with falsehoods”. Opponents of the reform say it would marginalise private renewable energy companies, sparking anti-competition and environmental concerns.
  • Amia said the CFE had “limited capacity” to generate clean energy, leading to reliance on fossil fuels. Amia also questioned the CFE’s capacity to reach the 54% quota, saying that it had only produced 40% of the electricity generated between January and September 2021, with private companies supplying the rest. According to Amia, this inability to generate enough energy would lead to less competitive electricity tariffs, risking loss of competitivity and generating uncertainty for investors.
  • Coparmex’s criticisms centred on the environment. The group said López Obrador’s government had “turned its back on the environment”, citing budget cuts to environmental institutions including the national forestry commission (Conafor), natural resources ministry (Semernat), and national water commission (Conagua), among others.
  • Coparmex also said the reform would break environmental pledges made in international agreements such as the US-Mexico-Canada Agreement (USMCA) on regional trade and the 2015 Paris Agreement on climate change.
  • The criticisms of the business groups followed concerns raised by US Energy Secretary Jennifer Granholm about the reform’s potential negative impact on US private investment in Mexico and joint efforts on clean energy and climate.

Looking Ahead: The congressional debate on the reform will conclude on 15 February. Given the level of criticism the reform has received, the ruling Movimiento Regeneración Nacional (Morena) party will likely have to agree to some major modifications to secure its approval in the lower chamber of congress. Morena needs the backing of 56 opposition politicians to reach the two-thirds majority required to pass the reform.