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Shannon O'Neil

Mexico’s Energy Grid Risks Fading to Black

President Lopez Obrador’s plan to renationalize electricity generation will make it more expensive, dirtier and less reliable and jeopardize the inclusive economic growth he says he wants.

Not the wave of the future. 

Not the wave of the future. 

Photographer: Mauricio Palos/Bloomberg via Getty Images

President Andres Manuel Lopez Obrador is exactly right: His proposed electricity reform would transform Mexico and its future — only not for the better. By making energy more expensive and less reliable, undermining free trade agreements and international investor protections and setting Mexico on an unsustainable climate path, it will leave Mexico behind.

The reform undoes many of the 2013 constitutional changes that opened up the hydrocarbons and power sectors to private and foreign investment. The state-owned Federal Electricity Commission (CFE) would be the main supplier and sole national distributor for power. It would also set wholesale and retail electricity prices; today’s independent regulatory agencies would either disappear or be folded back into the state entity. Private electricity generation and use, whether by companies for their factories or by residents with solar panels atop their houses, would end, the owners forced to sell their output to the grid rather than use it themselves.