Mexico suspends changes to legacy contracts

Mexico’s energy ministry has issued a decree to suspend the methodology, criteria and terms for legacy contracts in basic supply schemes as well as changes to the mechanisms for their evaluation.

The decree was published in the federal gazette as ordered by a judge.

The private electricity sector widely viewed the regulations as illegal attempts to re-order legacy contracts to benefit state-owned power utility CFE, triggering lawsuits which led to the court order.

“The second district judge … when analyzing the suspension requested by the complainants, resolved to grant the precautionary measure of the act claimed for the effect that things remain in the state as they are,” the ministry said in the decree. 

Juan Pablo Gómez Fierro, the judge issuing the order, has often sided with plaintiffs against government measures to boost state-owned energy companies at the expense of private firms. 

The legacy contracts in question relate to CFE basic supply contracts, which were locked in through the constitutional energy reforms during the previous administration. 

But the current government claimed these contracts are costing CFE billions of dollars in preferential rates, largely tied to transmitting private generators’ supply to consumers. 

President Andrés Manuel López Obrador has enacted a reform of the electric power industry law in March as part of a sweeping legal strategy to curb private participation in the electric power market.

Under the law, the government attempted to change the dispatch order, putting public electricity generation first, regardless of cost. It also wanted to rewrite the rules for clean energy licenses and for self-supply contracts and enable reviewing legacy contracts. The private sector and market observers have strongly criticized this strategy. 

With this latest ruling, however, the “methodology, criteria and terms for basic supply legacy contracts, of the terms, criteria, bases … are provisionally suspended,” according to the decree.  

The decree can be accessed here, in Spanish.