Mexico President Calls for Steps to Keep Power Prices Low

Mexican President Andres Manuel Lopez Obrador said on Monday contracts private companies have with state-run power utility CFE should be revised to keep electricity prices low, sending shares in one Mexican contractor tumbling

“We are urging companies that have agreements with the Federal Electricity Commission (CFE) to come together to review contracts and above all to reach an agreement that electricity prices will not increase,” Lopez Obrador said during his morning press conference.

Lopez Obrador noted that the state-run utility is already contractually obliged to pay billions of dollars to the private firms that developed seven gas pipelines to supply power stations, even though the projects are incomplete and unable to deliver gas.

Those companies are Mexican energy infrastructure firm IEnova, a unit of U.S.-based Sempra Energy; TransCanada Corp; and Mexican tycoon Carlos Slim’s Carso, said CFE chief Manuel Bartlett.

“If the pipelines can’t be built, as is happening in seven large gas pipelines, the companies still have to be paid even if there is no gas,” said Lopez Obrador.

IEnova’s shares dropped 6.7 percent, TransCanada’s were down 0.5 percent and Carso slipped 0.21 percent after the comments. In a statement to the Mexican stock exchange, IEnova said it has one pipeline that entered into operation in 2017, but that the supplies to CFE were interrupted due to “sabotage.”

Lopez Obrador has been a staunch critic of landmark 2013-14 energy reforms that ended the wholesale electricity monopoly held by CFE and opened up the Mexican oil industry to private investment.

“We are looking to achieve a voluntary restructuring of agreements and commitments within the framework of the law … The Mexican government is committed to not increasing electricity prices for consumers, but we want private companies to help in this initiative,” he said.

The reforms ended state oil company Pemex’s decades-long monopoly by allowing private producers to operate projects on their own as well as enter into partnerships with Pemex known as farm-outs.
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