The main issue at stake is not electric reliability nor Mexico’s energy security nor the financial health of state-run power company Federal Electricity Commission (CFE). Nor is it the environment or the price of electricity. The key matter in the power industry reform proposed by President Andrés Manuel López Obrador is: Will private investors still be allowed to be part of the Mexican electricity industry?
The answer from López Obrador and CFE general director Manuel Bartlett is blunt: NO. Private investors are adversaries, who were encouraged by traitors in neoliberal governments, they say. So, the answer is NO.
It is true, as López Obrador points out, that some politicians in the past wanted to wipe out the CFE. It happened once, at the end of the Ernesto Zedillo administration, in year 2000. The intention was to sell the whole company in just one year, almost giving away the power plants and transmission lines to private companies like Enron, the most corrupt of that period.
CFE survived that onslaught, but anger and resentment remained among many of its proud officials and technicians.In the political arena, Bartlett became the champion of these opponents of privatization.
Presidents Vicente Fox and Felipe Calderón ushered in a much better time for the CFE, which found support from the private sector to finance and grow its infrastructure. There was a big increase in the number of combined-cycle plants, which strengthened power generation capacity while cleaning up emissions. The “world-class company”, as CFE was known, and private enterprise worked hand in hand.
But Bartlett and his group of nonconformists did not much like this functional arrangement. For them, a single cent of private investment was far too much. Also, they were not much pleased by the fact that President Calderón shut down Mexico City’s power company Luz y Fuerza del Centro (LyFC) in 2009. LyFC had long been a corrupt anomaly in the power industry.
President Enrique Peña Nieto’s energy reform in 2013 set the foundations for a modern coexistence between state-run and private companies, based on a wide-ranging consensus in the Mexican Congress and following global best practices. The CFE continued to grow stronger, enjoying major advantages thanks to the creation of its commercial affiliate CFEnergía, a better pipeline network and dominance in transmission and distribution. The CFE would be robust enough to deal with emergencies, if it could have access to natural gas produced in Mexico.
With the electoral triumph of López Obrador in 2018, Bartlett and his group came onto the stage and took control of the CFE. Conflicts with private investors began immediately and now an electricity reform bill has been put forward that would return the industry to a de facto monopoly.
It is an ideological and political revenge. Today’s investors will pay for past grievances. A conflict is brewing that could hold back the industry for years. It would not only be a wasted six years of government, but the cost of litigation and arbitrage could be a major blow to public finances.
Yet from the peculiar viewpoint of the government, López Obrador and Bartlett would go down in history as defenders of the nation, just like Presidents Lázaro Cárdenas del Río and Adolfo López Mateos, who nationalized the oil and the power industries, in 1938 and 1960, respectively. They would achieve their dream of being, like Morelos, Juárez and Madero, nationalist heroes and protagonists of a new national transformation by rescuing the CFE from a foreign threat.
However, Cárdenas and López Mateos responded to demands of progress and to specific challenges of their time. Presidents Carlos Salinas de Gortari, by negotiating the North American Free Trade Agreement (NAFTA), and Peña Nieto, by promoting an energy reform, did the same. But have López Obrador and Bartlett rightly interpreted the demands of our time and of our country with their electricity reform proposal? Their attempt at expropriation seems unnecessary, based on a biased and incorrect technical analysis, a step backward rather than aspiring to modernity.
Renationalizing the power industry does not easily fit in with prevalent ideas in 21st century Mexico. How will future generations of Mexicans judge this new reform bill and its promotors? Will they really put López Obrador and Bartlett up beside the heroes? Or will they look upon them as adversaries and traitors who are trying to reverse the modernization of Mexico’s energy industry?
* David Shields is an energy industry analyst. His e-mail: david.shields@energiaadebate.com A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition.
