“United States is upset about the move by Mexico”
The Prime Minister of India, Narendra Modi targeted on Aatma Nirbhar Bharat, the nation should be self-sufficient in manufacturing the products.Likewise, the President of Mexico Andres Manuel Lopez Obrador believes in state-owned companies helping the state in providing electricity to its citizens. And not the Federal Electricity Commission to go bankrupt and lose market share.
The Mexico ruling Congress party is all set to pass a constitutional vote on the new electricity policy. This step would rewind most of the steps of the market opening in electrical power by the previous government. Countries like The United States and others have reacted towards the move. They have raised concerns that this move will not only affect the country’s foreign investments but also will violate trade agreements.
The law is practice:
It was in 2013 that the electricity reform was brought in the country. The then government built clean pipelines to import natural gas from the United States of America. It allowed the companies to use electricity from independent generators. The law had a provision of incentive for private and foreign firms. The incentives were provided if they planted a clean wind power turbine or gas-fired plant. Prior to which the electricity facilities were very poor owing to higher rates of electricity, scarce generating capacity by the federal electricity commission and also dirty power plants that burned fuel oil to produce electricity.
The new law:
With the previous government letting loose of the companies to have their own electricity plant installed and utilized, they received preferential treatment. They had a very big say in pricing,
purchasing and they needn’t have to pay the state-owned electricity unit, the Federal Electricity Commission. The installation of electricity plants made them to avail incentives and no processing of payment with the government. No fees for transmission of electricity through government owned lines was charged.
This resulted in losing market share and value by the state-owned electricity board. With the high maintenance of the electricity unit, the government had to take an action. No funding the electricity commission resulted in dirty fuel oil used and production stored which could be of no use to the public.
The need for the new law:
The president of Mexico has proposed a guarantee market share to the commission. 54% of the electricity market with private firms given the 46% of the shares. This would result in the higher power and role be practiced by the commission. It would get the preference, buying power from the commission plants first, and clean energy from the private lines would be the last in option. It is a fact that the private natural gas lines provide electricity 24% cheaper than the government run electricity commission.
Reactions to the law proposed:
The proposed law looks troublesome for the government to implement it. Under the 2013 reform, the electricity production was partially privatized or at least have given the freedom to produce their own electricity. Because of this Spain and the United States had invested in higher rates in electricity development of the country to build wind, solar and gas-fired plants. Now they have to revise the agreement and see what could be done.
The other companies with plants, firms, factories and stores had involved in long-term agreement of greener electricity supply and private generators. They have to rethink about the contract as they stand illegal now. Concerns about energy costs and greener energy are in question.
The law requires free competition in the market. But according to the U.S-Mexico-Canada free trade agreement or the USMCA, the member nations are not allowed to pass laws that favor domestic producers or state-owned firms. Now the proposed law could affect the ties and also the agreement signed.
1.The results of the law look clear. The US, retail and auto companies of the country have to pay more money just to buy dirty electricity.
2.The USMCA agreement will raise a complaint, which could result in buying Mexican products at a compensatory rate.
3.The companies with private plants installed, are to file a lawsuit as the investors are very upset about the enforcement of the law.
4.The critics are of the view that Congress will lose the two-thirds majority in the Parliament where the law has to be passed constitutionally.
Published by – Mohit Maurya
Edited by – Sonu M Kothari.