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A judge stops the fine of 9,000 million pesos to Iberdrola in Mexico

Iberdrola's headquarters, in Bilbao (Spain), in August 2021.
Iberdrola’s headquarters, in Bilbao (Spain), in August 2021.SOPA Images (LightRocket via Getty)

Iberdrola will not have to pay, for now, the historic fine of 9,145 million pesos, about 466 million dollars, imposed by the Mexican energy regulator. On Wednesday, a judge granted a definitive suspension of the payment while the amparo trial lasts, according to the public file and sources familiar with the case reported to this newspaper. The Spanish multinational claimed the suspension as a precautionary measure against the sanction of the Energy Regulatory Commission (CRE). The legal confrontation is based on the pulse between the Mexican government and the companies in the sector.

The definitive suspension represents a first victory for Iberdrola, the main private energy producer in Mexico. However, the CRE can still challenge the decision before a higher court, so the legal battle is expected to be long. The large fine that the Mexican regulator seeks to collect represents almost half of the net profits that the multinational reported on a global scale for the first quarter of the year. In September, a hearing will be held to address the substance of the matter: the legality of the operation of one of the numerous plants that Iberdrola has in the country.

The litigation stems from a complaint by the Federal Electricity Commission (CFE), the parastatal company, against a combined cycle plant of the multinational in Monterrey. This plant operates under a self-supply company, a scheme by which a private company can supply energy to businesses and factories that appear as partners. Self-supply was created in the 1990s, during Mexico’s economic opening, to facilitate private sector access to cheaper energy than that offered by the state-owned company.

After receiving the complaint, the CRE requested invoices from the Tax Administration Service (SAT) that prove, it assures, that Iberdrola received payments for supplying electricity to its partners. In the interpretation of the regulator, the sector law does not allow private generators to receive a consideration. In his opinion, the norm only contemplates the possibility of selling electricity to the CFE and that when there are surpluses or there is an emergency situation.

Faced with these arguments, Iberdrola defended the legality of its operation in Monterrey before the regulator because the law, it says, does not expressly prevent the sale of energy between the private plant and the partners of a self-supply company. According to the multinational, the norm prohibits the sale of energy to companies that are not partners in the self-supply scheme. Despite this position, the CRE agreed with the CFE and imposed the fine at the end of May. Three weeks later, Iberdrola responded by filing an injunction with the courts.

Behind this legal battle is the attempt by the Government of Andrés Manuel López Obrador to limit private participation in the energy sector and strengthen the CFE. Although the electrical constitutional reform proposed by the Executive was rejected by the Chamber of Deputies in April, the authorities are now seeking to reverse certain permits that they consider illegal through administrative processes. The self-supply schemes, the first objective of these efforts, have deprived the CFE of potential business clients that it now seeks to recover. According to the parastatal, these companies supply some 77,000 clients, including shops and factories.

Iberdrola has been repeatedly reviled by the president, who has accused it of corruption. She has also made him ugly by the appointment of former President Felipe Calderón, one of the most vocal critics of the current Administration, as director of a subsidiary several years ago. However, the complaint against the Spanish multinational was not the only one filed by the CFE with the CRE. In fact, its general director, Manuel Bartlett, recently warned that they would sue the rest of the 110 self-supply companies that he considers “illegal” for damages. The regulator, a supposedly autonomous entity, is seen as a key ally in López Obrador’s energy agenda.

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