Mexico ready to negotiate over power market shake-up

FILE PHOTO: Mexico's President Andres Manuel Lopez Obrador holds a news conference at the National Palace in Mexico City, Mexico

Mexico’s president on Thursday said he was ready to negotiate over changes to the electricity market that angered firms and foreign allies, opening the door to a potential compromise that could ease tensions over energy policy.

President Andres Manuel Lopez Obrador has vowed to strengthen the state’s role in energy production, saying previous “neo-liberal” governments handed too much control to the private sector at the expense of consumers.

Measures taken by the government in recent weeks to reduce the influence of private energy producers provoked protests from the European Union, Canada and Mexico’s most powerful business associations.

The leftist Lopez Obrador was more conciliatory on Thursday than he was previously, when he lashed out at the criticism.

“We’re open to dialogue with everyone, but the national interest will be put first,” he told a news conference, stressing Mexico would defend its position in court if necessary.

On Friday, the EU and Canada raised concerns about an April 29 order suspending operation of new renewable plants on the grounds the government needed to safeguard power supply during the coronavirus outbreak.

That evening, Mexico published new rules giving the state more control over approval of new renewable energy projects, intensifying concerns the administration was violating existing contracts and bent on squeezing out companies.

Lopez Obrador said the government was not expropriating anyone and only wanted “fair prices”.

“Because paying extra for electricity means the consumers, the people, have to pay more,” he added.

The president has pledged to revive state oil firm Petroleos Mexicanos (Pemex) and national power company the Comision Federal de Electricidad (CFE). He said previous contracts imposed onerous financial terms on the state.

The electricity dispute follows a spat last year over several natural gas pipeline contracts the government said were costing Mexico too much.

After weeks of talks, the dispute was resolved under revised terms the government said would benefit taxpayers.

According to officials and energy experts, the government wants to secure more favorable terms for the CFE in contracts with companies, while gaining more power over nominally independent regulators in how the market operates.

Critics contend that by restricting growth in renewable energy, the CFE will be able to use up fuel oil produced by Pemex that has become harder to sell on the open market.

The steps have rattled investors, depressing energy stocks. IEnova, a Mexican unit of U.S. firm Sempra Energy, hit a six-year low on Wednesday.

IEnova’s shares recovered some losses on Thursday.

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