Mexican power bill in U.S. sights as top energy official meets Lopez Obrador

01/20/2022 | 07:00am

MEXICO CITY, Jan 20 (Reuters) - Mexican President Andres Manuel Lopez Obrador's bid to tighten state control over electricity generation will be in the spotlight on Thursday as a top U.S. energy official visits, under pressure from her party to temper Mexico's plans.

U.S. Energy Secretary Jennifer Granholm, a Democrat, is due to meet Lopez Obrador in Mexico City during a brief visit. The leftist president has said that he is ready to explain why he is pursuing the power market shake-up during their talks https://www.reuters.com/business/energy/mexico-says-us-energy-secretary-visit-power-market-concerns-eyed-2022-01-17.

Lopez Obrador said Granholm will also see other ministers on the visit.

Lopez Obrador says his initiative to change the constitution to favor state power utility the Comision Federal de Electricidad (CFE) is a matter of national security, arguing past governments skewed the market in favor of private capital.

Not only did this weaken Mexico's cash-strapped state-owned energy firms, it also hurt consumers and public finances, according to Lopez Obrador, who says he is committed to lowering the country's carbon footprint with more hydroelectric power.

However, critics say his plans to give the CFE control of the market are discouraging investment in wind and solar power, will increase costs, and make Mexico more reliant on fossil fuels to generate electricity.

It has also caused diplomatic ructions.

Ahead of Granholm's visit, four Democratic senators in a letter urged her and U.S. Secretary of State Antony Blinken to "more forcefully express concerns" https://www.foreign.senate.gov/imo/media/doc/01-18-22%20RM%20Letter%20to%20Sec.%20Blinken%20and%20Sec.%20Granholm%20re%20AMLO%20&%20Mexico%20Clean%20Energy%20Commitments.pdf about Lopez Obrador's energy agenda, arguing it was "antithetical" to U.S.-Mexico relations.

"It would also threaten at least $44 billion in private investment in Mexico's energy sector, (and) negatively impact U.S. private sector investment in Mexico," senators Bob Menendez, Brian Schatz, Tim Kaine, and Jeff Merkley wrote.

The U.S. Department of Energy did not immediately reply to a request for comment. Lopez Obrador's power bill is in Congress and is expected to be voted on by the end of April.

The European Union ambassador to Mexico said recently https://www.reuters.com/markets/commodities/mexican-electricity-overhaul-is-hurting-investment-eu-says-2021-12-02 the initiative is crimping investment because it could hinder companies' commitments to increase use of renewable energy.

U.S. carmaker General Motors, a major investor in Mexico, in November warned https://www.reuters.com/business/energy/gm-flags-concern-over-renewable-energy-mexico-sees-investment-risk-2021-11-20 that without a solid basis for renewable energy generation, Mexico's auto industry could suffer.

The flagship of Mexican manufacturing has struggled under Lopez Obrador, with automotive output falling for a fourth year running in 2021. Meanwhile, gross fixed investment levels are some 16% below what they were when he won election in July 2018.

Neil Herrington, senior vice president for the Americas at the U.S. Chamber of Commerce, said Lopez Obrador's electricity proposal violated Mexico's North American trade obligations and could only weigh on bilateral relations.

"That is in no one's interest," he said.

Federico Peña, a former U.S. energy secretary, said that rather than insisting on a policy that undermined the confidence of U.S. investors, Mexico should be regarding the transition to renewable energies as a "win-win" for both economies.

"Look at the resources that Mexico has: sun, wind, open space, workers," he said. "They have experience in building highly sophisticated manufactures. They've got great potential." (Reporting by Dave Graham Editing by Daniel Flynn and Rosalba O'Brien)

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