Newsflash - The Mexican Supreme Court ruled against the Federal Executive and SENER in the constitutional control procedure filed by COFECE
February 08, 2021
Newsflash Ritch Mueller
On February 3, 2021, the Second Chamber of the Mexican Supreme Court of Justice (Suprema Corte de Justicia de la Nación) resolved the constitutional control proceeding filed by the Mexican Federal Economic Competition Commission (Comisión Federal de Competencia Económica; “COFECE”) against the “Administrative order issuing the Policy for the Reliability, Safety, Continuity and Quality of the National Electric System” (the “Policy Order”), published in the Federal Official Gazette on May 15, 2020 by the Ministry of Energy (Secretaría de Energía; “SENER”).
COFECE submitted a constitutional challenge before Mexico’s highest court alleging that certain provisions contained in the Policy Order (i) were contrary to the principle of legality set forth in Article 16 of the Mexican federal constitution since the need for the policy contained in the Policy Order was not sufficiently justified, in particular considering best international competition; (ii) infringed the principles of economic competition and free access set forth in Article 28 of the constitution, including the rights of consumers to have access to goods and services on competitive conditions; (iii) affected the autonomy and jurisdiction of COFECE in the exercise of its constitutional mandate and authority, in violation of the principle of separation of powers set forth in Article 49 of the constitution; and (iv) contravened the principles of non-contradiction of norms and constitutional supremacy set forth in Article 133 of the constitution and in the laws that regulate the energy sector.
The contested Policy Order, as alleged by COFECE and as recognized by the court, would prevent the existence of an efficient market for generation and supply of electricity where industry participants may compete with the Federal Electricity Commission (“CFE”), as the Policy Order would implement provisions that would become clear obstacles, ex ante, to the effective exercise of COFECE’s legal authority under Article 28 of the constitution. Furthermore, COFECE emphasized in its legal challenge against the Policy Order that the Federal Executive lacks the legal right to issue orders that infringe upon COFECE’s jurisdiction and sphere of authority as an independent constitutional body. It is precisely to avoid interference from other governmental branches that COFECE was granted constitutional autonomy and entrusted with ample authority on competition matters. COFECE also argued that, by infringing the aforementioned constitutional principles, the Policy Order sought to void or limit such authority, in breach of the principle of separation of powers.
In the context of the constitutional challenge filed by COFECE, the following competition concerns raised by the Policy Order were brought forward before the court by COFECE:
(i) The Policy Order affects the fundamental principle of open and non-discriminatory access to transmission and distribution networks, affecting competition in the electric generation and supply market.
(ii) The Policy Order changes the economic dispatch principle, by privileging the “reliability” of the National Electric System (“SEN”) over economic efficiency, thus affecting competition.
(iii) The Policy Order affords unfair advantages to CFE by privileging less efficient and more polluting power plants, thus reducing incentives for more efficient and green generation of electricity.
(iv) The Policy Order would compromise the technical autonomy and unbiased role of the National Energy Control Center (Centro Nacional de Control de Energía) as operator of the SEN by affording unfair advantages to CFE.