Mexican electricity law temporarily suspended: Update

Adds recipient of injunction.

A court temporarily suspended Mexico's new electricity law yesterday, a day after it took effect, signaling the start of a wave of litigation against the controversial reform.

"While this interim relief was requested by one company, it will have general effect," stated a Mexico City court judgment yesterday.

Zuma Energia was awarded the first injunction in relation to its La Orejana solar park in Sonora, but Argus understands that developers EDF and Naturgy also secured injunctions against the law. More are expected tomorrow.

Zuma Energia, originally backed by UK private equity fund Actis and acquired last November by China's State Power Investment, is developing 816MW in wind and solar projects in Mexico.

Mexico's new electricity law was published in the official gazette on 9 March after a fast-tracked legislative process launched by President Andres Manuel Lopez Obrador on 1 February.

The law prioritizes dispatching CFE-generated power regardless of cost or environmental impact, revokes self-supply permits and begins a review process of all long-term power purchase agreements (PPAs) between CFE and independent power producers (IPPs).

The temporary suspension of the law was awarded "to guarantee the rights to competition and a free market," states the decision.

Some 40,924 MW, or 48pc, of Mexico's installed capacity is operated under private-sector generation permits that will all be affected by the reform, lawyers have said, predicting an avalanche of legal action under Mexican law and foreign trade agreements.

The law will impact up to $39bn of investments in the renewable energy sector alone, Mexican wind and solar associations Amdee and Asolmex said.

Lopez Obrador's government has passed a flurry of regulatory changes over the past two years that have sought to strengthen CFE's market position despite the 2014 energy reform that called for an even playing field among market participants. But the courts have largely sided with private company legal action over the changes and the supreme court recently set aside the government's electricity policy because it contravened the constitutional right to free competition.

The government has two days to appeal the judgment.

By Rebecca Conan