What a sad, shameful and even tragic role Mexico’s energy regulators are being forced to play! President Andrés Manuel López Obrador, who is proposing a kind of “energy nationalization”, apparently for electoral purposes in 2021, is expecting the regulators to be mere puppets in his ideological mission of “rescuing” state-run energy companies, Petróleos Mexicanos (Pemex) and Federal Electricity Commission (CFE) and restricting private investment in energy, perhaps to the degree of reversing laws and investments already made.
“Blind loyalty” is what the President demands from his own. This implies obedience to the presidential order to no longer award permits to private parties for energy projects, which is the legal duty of the regulators. Indeed, he seized control over the Energy Regulatory Commission (known as the CRE) by designating loyal commissioners who he is now demanding to break the law, supposedly in order to favor Pemex and CFE.
The President does not care about the commissioners’ obligations and legality, but about his orders and loyalty. To keep on good terms with him, the commissioners have put the brakes on privately-owned power generation projects, especially in renewable energy, by not authorizing the new power plants to begin tests and comercial operations. They were also told not to award more permits for gasoline stations and fuel storage facilities.
The risk for the commissioners, in not doing their jobs, is that the companies being affected, by not having their procedures attended to, could take legal action against the commissioners for not complying with laws and regulations.
The commissioners ought to be aware that the President is wrong in his vision of energy policy and that private investment does not harm nor displace Pemex and CFE, but rather it grows and strengthens the country’s infrastructure. To suppose the opposite is an unfounded nationalist fobia. Private investors wish to contribute to the success of CFE, Pemex and the nation. They want to provide solutions, not to be part of disputes.
The commissioners ought to be aware that the President is demanding them to break the law in order to impose a false and ideological vision of energy policy. Going back to having state-run energy monopolies –if he seriously wants that– could imply expropriations with very serious consequences and could end up doing great damage to the country. That is not the way to “rescue” Pemex and CFE. Dignity should come first. The recent resignation of Alfonso Morcos as director of the National Power Grid Operator (known as CENACE) is being interpreted as a personal decision given the presidential order to break the rules for dispatching power plants that are set out in law. Similarly, to avoid committing an offense, Jaime Cardenas resigned from a top anti-corruption post.
CRE commissioners have a legal and moral duty that goes beyond loyalty. They are obliged to approve authorizations in line with the existing legal framework, and not to hold them back at an administrative level, as they are currently doing. They should show results in carrying out energy policy. In prior governments, the commissioners would also appear in public to explain advances in regulation, but the current commissioners have avoided this role.
At the end of the day, if common sense and dialogue fails and if the law is not obeyed, companies whose interests are harmed can go to court or legal arbitrage to challenge rulings and to seek compensation, as well as punishment for those responsible. They could also sue the government for non-compliance of USMCA, the new North American free trade agreement.
I would appeal to the conscience of the CRE commissioners and say to them: Please resign! Have some self-respect. Don’t be criminals. Or if you will not resign, then carry out the functions that are part of your job, instead of unconditionally following orders. Be true nationalists and get the new infrastructure up and operating. Approve the authorizations that are in process and respect the permits that have already been awarded. Do it legally. Do it for Mexico.
* David Shields is an energy industry analyst. His e-mail: firstname.lastname@example.org A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition.