Saturday, June 15, 2024

Spanish energy giant fined 9 billion pesos for violating electricity law

The Spanish energy company Iberdrola has been fined more than 9 billion pesos for violating a now-defunct electricity law.

The Energy Regulatory Commission (CRE), an ostensibly autonomous federal body, fined the firm 9.14 billion pesos (US $464.2 million) for violating the Public Electricity Service Law (LSPEE), which was repealed in 2013.

According to the CRE, Iberdrola sold electricity directly to customers that didn’t appear on permits issued while the LSPEE was still in effect. It supplied power generated at its Dulces Nombres plant in Nuevo León to “simulated” partners between January 2019 and June 2020, the CRE said.

The newspaper Reforma reported that the fine imposed on the company is equivalent to 56.4% of Iberdrola México’s income in the first quarter of 2022.

Óscar Ocampo, an energy expert with the Mexican Institute for Competitiveness (IMCO), a think tank, said the fine is the largest ever issued to a participant in Mexico’s energy sector.

He said it would generate uncertainty in the sector and predicted that Iberdrola – which President López Obrador holds up as an example of what he calls unscrupulous foreign firms that have “looted” the country – would challenge it.

“Iberdrola will probably defend itself and it will be a long [legal] process,” Ocampo said. “… It won’t have to pay out the money, at least not in the short term.”

The IMCO energy coordinator raised concerns about the disproportionate size of the fine and the message it sends to other private energy companies, which have faced a hostile government since López Obrador took office in late 2018.

Writing in the El Economista newspaper, columnist and former federal lawmaker Gerardo Flores Ramírez said it was clear that the CRE’s “mega fine” was an “administrative outburst” from the federal government, “which has decreed that Iberdrola is an enemy that must be vanquished and destroyed if possible.”

For his part, López Obrador described the 9-billion-peso fine as “fair” and reiterated that “Mexico is not a land of conquest.”

“I had no knowledge [of the fine] because revenge isn’t my forte,” he said Saturday while touring northern Mexico.

Iberdrola, which has a presence in 15 states, is one of the largest private energy companies in the Mexican market, but its investment here fell to just US $16.1 million in the first quarter of 2022, a 93% decline compared to five years ago and a 60% drop in the space of a year.

In late 2020, Iberdrola threatened to stop investing in Mexico altogether due to a lack of clarity about how the government would treat foreign companies.

CEO Ignacio Galán said in late April that the company didn’t expect to invest heavily in Mexico in the near future, even though a proposed electricity reform that would have favored the state-owned Federal Electricity Commission over private firms failed to pass Congress.

With reports from Reforma and El Financiero

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