The Supreme Court (SCJN) has rescinded key elements of a federal energy policy in a major setback for the government, which is trying to reshape the electricity market to favor the state-owned Federal Electricity Commission (CFE).

The court, which last June suspended the energy reliability policy pending a final ruling, definitively struck down 22 provisions of the same policy, which was published by the Energy Ministry (Sener) last May.

By four votes to one on Wednesday, the second chamber of the SCJN invalidated provisions in the policy – which imposed restrictive measures on the renewable energy sector – that it ruled violated the constitution in areas including free competition and sustainability. Only five provisions of the Sener policy were declared legal.

The court’s decision came in response to a complaint filed by Mexico’s antitrust regulator, the Federal Economic Competition Commission (Cofece). The ruling is a blow for the government’s plans to sideline private and renewable companies from Mexico’s power market.

The government sent a bill to Congress on Monday that proposes a sweeping overhaul of the electricity market to favor the CFE but the legislation, which is expected to be approved, will almost certainly be challenged and could also be struck down by the Supreme Court.

That eventuality, which appears likely based on Wednesday’s decision, would put a sizable dent in President López Obrador’s ambition to wind back the previous government’s energy form that opened up the sector to foreign and private companies for the first time in almost 80 years.

Among the energy policy provisions rescinded by the Supreme Court on Wednesday was one that gave priority to safety in the dispatch of power over economic efficiency.

Another provision that was struck down allowed the National Energy Control Center to determine – based on criteria established by the Energy Ministry itself – whether an application to supply power to the national grid should be considered or not “without taking into account the general technical specifications approved” by the Energy Regulatory Commission.

The court said the provision could lead to the “interconnection applicant” – most likely a private company – being unfairly shut out of the electricity market.

Source: Reforma (sp)