Mexican presidential candidate Xóchitl Gálvez on Monday applauded a recent Supreme Court ruling that invalidated one of President Andrés Manuel López Obrador’s most controversial energy policies.
Mexico’s high court deemed unconstitutional a set of modifications to Mexico’s electricity industry law (LIE) that sought to prioritize the dispatch of electricity from power plants owned by state utility Comisión Federal de Electricidad (CFE) – regardless of cost – over cheaper, privately owned generation resources.
The reform also would have eliminated the obligation for CFE, Mexico’s largest power distributor, to procure electricity via competitive auctions. Natural gas-fired plants supply about 60% of Mexico’s electricity.
Competitive auctions and private sector competition both were hallmarks of the previous government’s 2013 constitutional energy reforms, which the López Obrador government has sought to roll back.
Legislators approved the LIE reform in 2021, but its implementation was quickly halted amid numerous legal challenges. While the court had previously stopped short of saying the LIE modifications violated the constitution, the latest ruling did precisely that.
“Fortunately, the court has ruled that the reforms are unconstitutional,” Gálvez said Monday through an interpreter during an event hosted by the Wilson Center think tank in Washington, DC. “This means that the reform will go back to being what it was back in 2013.”
Gálvez criticized what she called “crony capitalism” in the energy sector under López Obrador, explaining that “if you are close enough to the president, you will see your problems sorted out but if you don’t have a relationship then your problem is not sorted out, and that should be changed.”
She added, “In light of energy shortages, we must welcome the participation of the private sector…the Mexican utility CFE will continue to be part of the system but not in a privileged position.”
Gálvez indicated that decarbonization and affordability would be the pillars of her energy policy if she wins the election, which is scheduled for June 2.
“Businesses need to have more affordable energy, as do the households…and the auctions were the perfect mechanism to attain that goal so we need to go back to that…I do not care who generates affordable energy. If the Mexican utility does, they can sell it. If the private sector does, they can sell it.”
As for the energy transition, Gálvez said, “I’m fully convinced that the future of energy is electrical power, and the future of electrical power comes from renewable energy…and we are going to get there if we build a strong grid.”
Gálvez faces a tough road to the presidency, however.
Her opponent, Claudia Sheinbaum –the former mayor of Mexico City and a López Obrador protege– holds a 54% to 27% advantage over Gálvez among likely voters, according to a recent poll commissioned by newspaper El País.
In any event, the latest LIE ruling “delivers a major setback to López Obrador’s energy-sector agenda and removes the most contentious item in the ongoing consultation process of the United States-Mexico-Canada Agreement,” said Eurasia Group analyst Matias Gomez Leautaud. “This setback for López Obrador highlights the importance of the upcoming congressional elections and heightens the incentives for the next administration to gain influence over the Supreme Court.”
He noted that if Sheinbaum wins, “she would be able to name at least four justices during her term. In fact, the court’s balance would shift in favor of Morena early in Sheinbaum’s term, as she would be able to fill a vacancy in December 2024.
“That would create a cohort of four justices who are aligned with the administration and able to block any challenges to the constitutionality of its legislation.”
Gomez Leautaud added, however, that Sheinbaum “is unlikely to enact legislation that would obstruct the country’s transition to cleaner sources of energy (as the LIE changes did), since the energy transition will be a priority for her administration.”
