Supreme court allows Mexican energy ministry to set electricity rates with regulator

Mexico’s supreme court has cleared the way for the energy ministry to coordinate with sector regulator CRE to set electricity rates, with seven of 11 justices supporting the decision, local media reported.

In doing so, the court upheld changes to section XXI of article 33 in Mexico’s public administration law passed in 2018 at the request of Andrés Manuel López Obrador, who was then president-elect. 

Those reforms reorganized much of the federal government, eliminating some agencies and ministries and merging others, as well as creating a raft of new entities.

The changes included establishing a closer relationship between the energy ministry (Sener) and the ostensibly autonomous and independent regulator. 

The decision also follows last month's rejection by Mexico’s lower house of congress of sweeping energy sector reforms that would have likely resulted in the outright elimination of the CRE, or the body’s relegation to a sub-unit at Sener, and given state-owned utility CFE broad powers to set electricity rates on its own.

Those reforms would have also made CFE the sole buyer of wholesale electricity in the country.

The court reviewed claims of the unconstitutionality of the reforms made by opposition lawmakers, with justices voting to reject those allegations on Tuesday evening. 

Private sector energy chamber Comener disagreed with the ruling, saying in a statement, “The modification to this article violates the autonomy of the CRE to independently determine electricity rates in the country.” 

The justices who voted against were Alberto Pérez Dayán, Juan Luis González Alcántara Carrancá and Javier Laynez Potisek, who argued that, after the 2013 energy reform, the only body specifically empowered to determine electricity rates was the CRE. 

Justice Luis María Aguilar Morales led the support for the ruling, arguing it was not an overlapping of powers, but rather a form of collaboration between agencies in the same federal administration. he also posited that article 139 of the national electricity industry law (LIE) authorizes the federal government to establish a rate mechanism other than final rates being determined by the CRE, at least with basic supply contracts. 

Basic supply, also dubbed self-supply contracts, refers to a scheme by which a generator can produce in one part of the country and sell directly to a client anywhere else with very low transmission fees across the CFE-owned grid.