The Supreme Court of Justice of the Nation rules that certain provisions of the Electric Industry Law are unconstitutional.

Mexico City, February 2nd, 2023.

On January 31, 2024, the Second Chamber of the Supreme Court issued a ruling on the amparo 164/2023 filed by six private sector companies against the provisions of the “Decree amending several provisions of the Electricity Industry Law” published in the Official Gazette of the Federation on March 9, 2021 (referred to as the “Amendment”). This pertains to the review of the amparo filed by energy sector companies against the Amendment enforced in March 2021, which granted precedence to the Federal Electricity Commission (the “CFE”) over private enterprises in the wholesale electricity market.

The project proposed nullifying the modifications established by the Amendment in articles 3, sections V, XII, XII bis, and XIV, 4, sections I and VI, 12 section I, 26, 35, first paragraph; 53; 101, 108, sections V and VI, and 126, section I of the Electricity Industry Law (“EIL”). Furthermore, the amparo was dismissed concerning the fourth transitory article (related to the review of self-supply permits), while the fifth transitory article (related to the review of contracts awarded to independent energy producers) was not subject to the amparo in question.

Primarily, the Second Chamber of the Supreme Court determined that the order of precedence in the dispatch of energy established by the Amendment, which prioritizes state-owned generators such as the Federal Electricity Commission (“CFE”) and its associated power plants to channel their energy into the National Grid, contradicts the principles of free competition outlined in Article 28 of the Federal Constitution and the 2013 Energy Amendment. This pronouncement affects all individuals and companies which are a party in the electric sector, as it was estimated that failing to do so would create inequality in the market concerning the contracting of electric power, access to networks, and the acquisition of clean energy certificates, benefiting the companies directly involved.

The Supreme Court considered that the goal of strengthening state-owned companies is neither a valid nor sufficient reason to go against the constitutional principles established in the 2013 Energy Amendment, which determined that CFE should compete on equal terms with other participants in the electricity generation market.

Moreover, the Amendment changed how clean energy certificates are awarded, enabling both entities in the market following the guidelines of the 2013 Energy Amendment and generators adhering to the previous framework of the Law of Public Electric Service to obtain these certificates. The Supreme Court expressed concern that this modification might disrupt the clean energy certificate market by possibly leading to an overabundance of certificates, thereby discouraging actual production of clean energy and infringing upon the rights to a healthy environment and sustainable development.

The lawyers specializing in Administrative Law, Energy, and Infrastructure at our firm are at your disposal for any questions or comments regarding this matter.

Sincerely,

Juan Carlos Serra

serra@basham.com.mx

Diana Rangel León

drangel@basham.com.mx

Pablo Nosti Herrera

pnosti@basham.com.mx

Pablo Chevez Gallegos

pchevez@basham.com.mx

Fernando Osante Kretchmar

fosante@basham.com.mx

Pamela Salas García

psalas@basham.com.mx

Daniela Pineda Robles

dpineda@basham.com.mx