AMLO to defend rules for Mexican wind farms in court

AMLO to defend rules for Mexican wind farms in court

Asset Management Capital Markets Corporate & Sovereign Strategy Economy & Policy Fixed Income Mexico Latin America Coronavirus

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Mexican President Andrés Manuel López Obrador said on Thursday that he would go to court to defend his administration’s new rules affecting the connectivity of solar and wind farms to the electrical grid, pointing to past corruption in the electric energy sector while stressing his adherence to the law.

“We are going to defend our criteria in the courts, because we have the right to do it,” AMLO said in a press conference. “I have instructed public servants at the Federal Electricity Commission (CFE) to defend our position that there be no privileged for companies. Corruption cannot be permitted, and much less so now.”

Mexico’s National Energy Control Center (Cenace) issued a new rule on April 29 halting the connections of new solar and wind power projects to the electric grid as of May 5, citing the need to secure the reliability of electric services during the COVID-19 pandemic. But on May 15, a court of law granted legal protection from the rule to a group of wind farms. Nevertheless, on May 15, the ministry of energy of Mexico set new reliability criteria for electric generation plants complementing Cenace’s new rules.

AMLO, as the president is known, said he was not against clean energy but against corruption.

“We are against the corruption, the looting and the lobbying that prevailed during the neo-liberal period in the electric sector,” he said, adding that concessions and onerous contracts affecting the national interest and the people of Mexico led to very high electric energy prices and to the destruction of the Federal Electricity Commission. “All to give preference to private generation plants, especially foreign ones,” he said.

Mexico’s new electricity market rules are credit negative, Moody’s said in a sector comment on Wednesday. The rule could favor energy distribution by the CFE, and they are credit negative “because they will limit renewable projects’ energy distribution, delay revenue generation for private projects and add uncertainty about future investment in renewable energy and Mexico’s ability to achieve clean energy targets,” Moody’s said.

Moody’s also said it expects that under the new policy the CFE will increase fuel oil usage, adding that the measure could support Pemex’s refining business.