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Home News Mexico’s Supreme Court Strikes Down López Obrador’s Power Sector Rules

Mexico’s Supreme Court Strikes Down López Obrador’s Power Sector Rules

by Celia

MEXICO CITY – A panel of Supreme Court justices in Mexico delivered a decisive ruling on Wednesday, rejecting President Andrés Manuel López Obrador’s policies favoring the state-owned electrical power company over private power companies.

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The five-judge panel issued a resolution asserting that the president’s approach violates constitutional guarantees of free competition within the power sector.

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Under previous regulations, power plants competed to supply electricity based on offering the lowest price. However, López Obrador’s directives granted priority to the state-owned Federal Electricity Commission in selling power to the grid. This relegated private, predominantly foreign-owned power generators to the back of the line, despite often producing cleaner energy compared to the commission, which operates many power plants fueled by oil or coal.

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The U.S. government lodged a formal objection to the law, contending that the U.S.-Mexico-Canada free trade agreement prohibits favoring domestic companies over those from other member states.

López Obrador’s policies also marginalized private natural gas plants, positioning them nearly last in line — ahead of only government coal-fired plants — for the opportunity to sell electricity to the grid, despite their ability to produce power at a cost savings of approximately 24%. The legislation essentially guaranteed the government electrical utility a dominant share of the market.

The implications of Wednesday’s ruling remain uncertain, particularly regarding whether relief will extend solely to the companies that initiated the appeal and the nature of that relief.

López Obrador has consistently advocated for state-owned enterprises and has expressed opposition to the privatization initiatives introduced by previous administrations, which facilitated the construction of cleaner gas, wind, and solar power plants in Mexico by foreign firms.

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