Mexico’s Comisión Federal de Electricidad (CFE) has won an arbitration case against Whitewater Midstream LLC related to Winter Storm Uri.
The storm devastated the Texas power and natural gas grid in February 2021, and natural gas prices skyrocketed, causing disruptions in supply and power outages on both sides of the border.
Whitewater claimed CFE owed the firm an undisclosed amount of money for gas delivered during the storm. The company’s legal team argued CFE was in breach of contract for nonpayment for gas deliveries.
The court’s ruling means Whitewater will end up instead paying CFE penalties related to this case, according to a document filed last week in a U.S. district court in Houston.
Separately, CFE International (CFEi) remains in litigation with former company officials over alleged corruption in the awarding of contracts under the government of former Mexico President Enrique Peña Nieto.
CFEi is the international fuel procurement arm of CFE, and among the largest natural gas marketers in North America.
CFEi alleged that former executives “awarded billions of dollars of unnecessary and overpriced natural gas supply and pipeline contracts” to WhiteWater through non-competitive processes, and in violation of the executives’ fiduciary duties to CFEi.
The executives allegedly failed to disclose personal and professional ties to Austin, TX-based WhiteWater’s management team.
WhiteWater, which is not named as a defendant in the civil complaint, has denied that any impropriety occurred in the awarding of the contracts.
Houston-based CFEi procures U.S. natural gas supply for CFE’s fleet of gas-fired power plants in Mexico. The company achieved profits of $227 million in 2023, of which 90% came from marketing to third parties, according to Miguel Reyes, CEO.
Reyes said recently that, “thanks to the integral supply strategy implemented by CFEi in the United States, we improved the cost of natural gas while obtaining greater operational flexibility and diversification of providers of the molecule.”
The company is also seeking to develop underground gas storage capacity in South Texas, in order to optimize natural gas purchases and hedge against future supply interruptions.
Under outgoing President Andrés Manuel López Obrador, CFE has engaged in numerous contractual disputes with natural gas pipeline operators, alleging unfair terms negotiated by the previous regime.
Most of the disagreements have been resolved amicably, and companies involved continue to work with CFE on developing new natural gas infrastructure.
Meanwhile, the U.S. and Canadian governments have alleged that Mexico’s energy policies violate the United States-Mexico-Canada free trade pact (USMCA) by unfairly discriminating against U.S. and Canadian firms.
In 2022, the Office of the U.S. Trade Representative (USTR) announced a request for dispute settlement consultations under Chapter 31 of the USMCA, claiming that Mexico’s public policy and regulatory actions during the current administration have negatively impacted U.S. companies in the energy sector.
After almost two years of consultations and discussions, there has been little progress in the matter. It could end up reaching a panel process before the end of the López Obrador sexenio, or six-year term.
