On April 22nd, 2021, the Antitrust Commission (“Cofece”) filed a constitutional controversy before Mexico’s Supreme Court against the Decree through which several provisions of the Electric Industry Law are amended and added published on March 9, 2021 in the Official Gazette of the Federation (the “LIE Amendment”). The LIE Amendment is considered by Cofece to be in breach of constitutional principles of competition and free market access, and thus an encroachment of its duty to protect competition in the electricity market.
Cofece considers the LIE Amendment:
- Breaks the rule of open and non-discriminatory access to distribution and transmission networks, thus reducing the ability of certain generators and marketers to compete.
- Eliminates the economic dispatch rule of power plants, granting undue advantages to the State company, Federal Electricity Commission (“CFE”), nullifying the ability of other agents to compete in the generation segment.
- Dilutes the rule of open access to networks, enabling refusals to grant access to this indispensable input when there are no impediments or legitimate justifications for it.
- Allows suppliers of basic service, specifically CFE, to acquire energy through non-competitive methods, indefinitely extending the legacy regime, which was originally transitory.
In Cofece’s opinion, the measures contained in the LIE Amendment are contrary to the Constitution and eliminate the conditions for the existence of a competitive dynamic in the electricity market. This in turn would distort conditions for the supply of electricity, as well as harm consumers and the economy in general.
As reference, a constitutional controversy is a claim brought before the Supreme Court of Justice of the Nation (which has original jurisdiction) to settle conflicts of constitutionality or legality arising from the distribution of powers in the different legal realms (Federal, State or municipal)stemming from the division of powers.
Substantiation of a constitutional controversy may result in the suspension of the legislation or administrative act challenged. This process may take on average between 8 to 12 months to be decided by the Supreme Court.
González Calvillo has an expert team in energy regulation, economic competition, and constitutional defense. We are prepared to advice in relation to the content of the LIE Amendment and the constitutional controversy.
We remain at your service for any questions or clarifications regarding the scope of this document.
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