It's official: Sheinbaum abolishes Mexico's energy regulators

Mexico's congress has three months to design a new regulatory framework for the energy sector after President Claudia Sheinbaum abolished the country's independent regulators.

Late on Friday, Sheinbaum signed into law constitutional reforms that will dissolve regulatory bodies including hydrocarbons commission CNH and electricity regulator CRE.

Other agencies to disappear include competition authority Cofece and telecom regulator IFT.

Sheinbaum's decree gives congress 90 calendar days in which "to make the necessary adjustments to the law."

Increased state control

The controversial reforms were proposed in February by previous president Andrés López Manuel Obrador, Sheinbaum's political mentor. They were approved by congress in November.

The reforms are designed to increase the State's control over the energy sector and weaken competition from the private sector. They will strengthen state-owned oil company Pemex and federal electricity firm CFE.

In the electricity market, the reforms specify that private companies will "in no case take precedence over the public company of the State [CFE]."

Analysts have said the wide-ranging regulatory changes will make it harder for Mexico to attract private investment in the energy sector.

In a press release Sunday, Mexican employers' federation Coparmex said the abolition of the regulators was "a backward step for transparency, economic competition and the protection of rights."

What happens next

The presidential decree changes article 28 of the constitution to specify that the executive branch will regulate the energy sector, but it does not define the new institutional framework.

In an article this month for the Baker Institute for Public Policy at Rice University, Mexican energy analyst Miriam Grunstein said the most likely scenario was for a regulatory department to be created within the energy ministry, operating under the authority of the energy secretary. 

Grunstein said this would deal "a fatal blow to regulatory oversight."

"With thousands of existing permits to approve and administer, a small regulatory office will not be able to attend the needs of a vast energy ecosystem," Grunstein warned. 

"The regulators originally established to promote market development are now poised to become enforcers of the state monopolies."