US ambassador cites "serious concerns" on Mexico energy bill

The U.S. ambassador to Mexico says his country has “serious concerns” about the Mexican government’s attempts to limit competition in the electrical power sector

The U.S. ambassador to Mexico said Wednesday that his country has “serious concerns” about the Mexican government’s attempts to limit competition in the electrical power sector.

Ambassador Ken Salazar said he met with Mexican officials to discuss a proposed constitutional change to restrict the market share of private power generators and favor Mexico’s state-owned utility company.

Salazar wrote in his Twitter account that “I expressed the serious concerns of the USA,” adding that “we agreed to continue the dialogue in the coming days.”

Previously, a group of U.S. legislators from Texas had voiced their own concerns over President Andrés Manuel López Obrador’s proposal, which faces an uphill battle in the Mexican Congress.

In a letter to Salazar in October, about 20 Texas congressmen and senators said López Obrador's proposal would “discriminate against American energy producers.”

The bill that López Obrador submitted in October would cancel contracts under which 34 private plants sell power into the national grid. The plan would also declare “illegal” an additional 239 private plants that sell energy directly to corporate clients in Mexico. Almost all of those plants are run with renewable energy sources or natural gas.

The measure also would cancel many long-term energy supply contracts and clean-energy preferential buying programs, often affecting foreign companies.

It puts private natural gas plants almost last in line — ahead of only government coal-fired plants — for rights to sell electricity into the grid, despite the fact they produce power about 24% more cheaply. Government-run plants that burn dirty fuel oil would have preference over private wind and solar plants.

The plan guarantees the government electrical utility a market share of “at least” 54%, even though U.S.-Mexico-Canada free trade pact prohibits favoring local or government businesses.

The letter from the U.S. lawmakers from Texas said that “the (Mexican) government’s proposed constitutional reforms would increase state control of the electricity industry and severely limit private investment. These steps, among others, harm our critical trading partnership with Mexico and potentially violate key tenets of the USMCA.”

Mexico's government says it is seeking to cooperate with the United States on renewable energy. Yet many of the wind and solar electrical plants that López Obrador wants to limit were built by U.S. or Spanish firms.

López Obrador, a native of the oil-producing Gulf coast state of Tabasco, has made his main push in promoting fossil fuels. His administration is focused on building or acquiring new oil refinery capacity.

Experts say López Obrador’s polices also could endanger Mexico’s compliance with existing carbon reduction commitments. The president contends that increased hydroelectric capacity will allow Mexico to meet those goals.