Why a Greenpeace lawsuit still threatens Mexico's 2021 power reforms

A Greenpeace lawsuit pending with Mexico’s supreme court could still threaten the non-constitutional reforms to the electricity industry law (LIE) implemented in 2021, according to an expert.

“This is the only mechanism available at this point,” Gonzalo Monroy, managing director at energy consultancy GMEC, told BNamericas.

The so-called amparo, a legal measure to shield a party from a law, filed by Greenpeace "is still going," said Monroy.

He added a meeting between the judge and both parties to the suit is scheduled for mid-May, but a date for a final vote is not known.

The lawsuit follows major developments in the government’s drive to prop up state-owned utility CFE as the predominant player in the electric power sector. 

One involves the failure of President Andrés Manuel López Obrador’s (AMLO) Morena party to win a two-thirds lower house majority in an April 17 vote to implement constitutional sector reforms.

The reforms would have led to the cancellation of private power generation and sales contracts, eliminating autonomous grid operator Cenace as well as energy sector regulator CRE and hydrocarbons regulator CNH, with their competences going to energy ministry Sener and CFE.

CFE would have become the sole buyer of electricity in the market, while also being able to establish pricing among other regulatory powers.

The 2021 LIE reforms were more modest, but both initiatives included the creation of priority dispatch, whereby the grid would be required to first buy energy from CFE and then renewable power from private generators, while private conventional power would have fallen by the wayside, to be bought only as a last resort.

The lighter reforms would also grant clean energy certificates to CFE for its hydro, geothermal and nuclear generation, based on a controversial interpretation of the government’s clean energy transition guidelines.

On April 7, the supreme court ruled on three constitutional complaints against the 2021 reforms, but the plaintiffs failed to garner the support of 8 of the 11 judges to overturn the reforms.

However, whereas these complaints related to constitutionality, the Greenpeace lawsuit focuses on human rights, linked to clean energy access, Monroy said. Hence, it “only needs a simple majority, six votes.” 

Should the court again uphold the LIE reforms, Monroy said, they will be implemented on a case-by-case basis, with multiple individual amparo lawsuits still to be reviewed.

Monroy said these individual cases, filed by private market players, will be largely based on arguments related to competition or the environment. 

While congress ratified the Paris agreement commitments in 2020, the government’s refocusing on hydrocarbons is seen as detrimental to compliance. 

Companies may argue on the basis of these commitments or previous laws, including the 2012 general law on climate change, or cite goals such as 35% clean generation by 2025, to win exemptions from the law. 

If individual amparos are granted, Monroy said, various aspects of the law may apply only to the part of the industry lacking the protections.

“Some may get the injunction and become an exception, and the new priority dispatch [for example] will not apply to them,” said Monroy. “Others, those that do not obtain a favorable resolution, will pledge to the new rules.”