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Electrical, and electoral, power

20 April 2022

With the narrow defeat (or… rather… narrowly not passed) … electrical system reform bill last Sunday (17 April), the pundit class is already weighing in on the future of power in this country… political power that is.

With overwhelming support from the ruling MORENA party and its coalition partners in the Chamber of Deputies, the bill, which would have only semi-nationalized the electrical generating system (only 53% would be state owned, as opposed to, say, the 75% in “free market” France) but with the opposition parties holding over a third of the delegations, and loathe to undo the “reforms” that were passed under the previous administration, it was always dubious that the administration would find the 53 votes it needed.

And, between party loyalty, intense lobbying by not just the foreign energy companies , and not so subtle threats to Mexican exports by U.S. Ambassador Ken Salazar, the bill was simply not going to pass.

Environmentalists also raised some legitimate objections… older CFE (the state system) generators are less “green” than those newer systems built by the foreign companies. Which did not mean they’d necessarily stay in operation, or wouldn’t be upgraded, and their concerns were worth looking at. However, there were also those AMLO dismissed as “pseudoenvironmentalists” who simply glommed on the green objections as a way to oppose the bill without appearing to side with the reactionaries who were being pilloried by the left for being sell-outs to foreign interests, or simply greed-heads. Given that the fallout from bribes paid to open PEMEX to competition is still in the news, nobody wants to be the target of some future investigation, or have their taxes too closely scrutinized should there be a reform.

Coupled with the low turnout for the recent referendum (also pushed by the administration) the failure to pass what was to be a jewel in the crown of the “Fourth Transformation” by re-nationalizing the electrical generation system (as it was in 1962) one would think… and, if a member of the opposition, hope… it means MORENA is in retreat, and the old “duoploy plus one” (PRI-PAN-PRD) is coming back.

Unlike the United States, where discussion of the “next” presidential election begins before the final vote count is even done, Mexico’s next presidential election is still a little over two years off, and it’s way too early to offer predictions. Which doesn’t mean people don’t.

What polls are out there show massive support for Morena. Even without a bespoke candidate, were the election today, they’d capture the Presidency by a(nother) landslide:

Even if … as endlessly discussed, PRI-PAN-PRD (“Priand”) had a coalition candidate… would not stand a chance. Even if the “centerist” Citizens Movement” (MC) and the Greens (PVEM), both seeming to be “rent-a-parties” with their own agendas (basically whatever benefits their leadership) joined the opposition, MORENA would still win. Which doesn’t mean they would also have a “supermajority” in a new legislature, given the proportional representation system used (200 of the 500 delegates are selected by their party, based on their relative showing in the general election) designed to prevent any one party from having more than 2/3rds the seats. Which, however, they could have with a coalition partner (say, MORENA and the Workers Party [PT] or Greens [PVEM]… the ruling party’s present coalition partners in the legistlature). However, they’ll be damned close, and have fewer opponents to win over.

And, by that time, quasi-nationalization may already be underway. On Monday, the day after the “defeat”, Lithium deposits were declared a mineral vital to national security. Passing a bill nationalizing lithium deposits only required a regulatory change, something only needing a majority of votes, and the bill was introduced and passed in the Chamber within a couple hours. Done.

Today, Tuesday (although by the time this is posted, probably Wednesday), the administration began whittling away at the foreign energy providers. Among the rationales for reform was a “loophole” in the existing system, whereby a business entity can generate power for its own use, selling the excess to CFE at a rate they set… i.e., higher than CFE can charge its regular customers, but forced to buy.

Notably, the administration was highlighting OXXO, the ubiquitous convenience store (and receiver of funds for banks, utility bills, on-line merchandise payments, etc. etc. etc.) pays less per store for heating, cooling a wall of beer coolers, lighting, computers, etc. than the average household. But… .even if the stores are franchises… they can legitimately claim to be part of the same group buying their electrical power together. Not so the 120 or so providers that put together what were basically buyers’ clubs of unrelated businesses and even individual home owners. At present, they are being “invited” to discuss their situation. Before the tax authorities, and/or federal prosecutor, steps in that is. Invited. Maybe to agree to a buy-out, like the government did with the few remaining private generating plants back in the 1960s?

At any rate, given this will be a multi-year process, and the presidential election is in two years, while one expects it will be a dominant issue for Morena, there are a few outside issues that could play a role. The most obvious is the European situation.

The war, or “special military operation” in Ukraine has led to massive shortages of fuel, specifically Russian natural gas, in Europe. With the US pressuring the Europeans to not buy from Russia, and Spain (whose private electrical generating system is raising prices beyond consumers’ ability to pay, and nationalization is more and more a possibility) being the main home of the private producers here in Mexico, might be forced to either raise rates here (making the case for nationalization even stronger) or have to sell to raise the cash needed to survive at home. Or… with the United States using the Russian boycott as a rationale for more liquid gas exports to Europe and elsewhere, cutting off Mexico’s access to a “cleaner” source than coal, there might be more support for the argument that the foreign companies, with their newer and “greener” technologies, need to stay on. Or… pressed to speed up the conversion to electric cars and transit systems, the price of lithium will go up, making those nationalized deposits here all the more viable (and subject to … ahem… interest by foreign “investors”).

“If present trends continue”… though they never do (not exactly, anyway)… Morena will control both the presidency and the legislature for the next several years, the Fourth Transformation will continue though at a slower pace, and some form of semi-nationalization of the electrical system will progress. And our light bills will still go up.

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