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Federal judge suspends Ministry of Energy policy that forced private companies to buy from state owned Pemex and CFE

Mexico City, Mexico — A federal judge has indefinitely suspended the most recent government energy policy, which forced private companies to buy natural gas from the state-owned Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE).

On Monday, Judge Juan Pablo Gómez Fierro granted the definitive suspension against the policy of the Ministry of Energy that establishes that users, or those interested in receiving the natural gas transportation service at the entry points of the Integrated National Transportation and Storage System of Natural Gas (Sistrangas), must certify that they receive the supply from one of the state production companies or their subsidiaries or affiliates.

“If it is not suspended, it could irreversibly affect the development of regulated activities in the hydrocarbon sector, specifically in matters of natural gas,” argued the Second District Court in Administrative Matters Specialized in Economic Competition.

One of the reasons for the definitive suspension was that with this new strategy, users and new applicants were forced to enter into contracts with state companies, thus altering the legal and economic conditions that allow the development of the hydrocarbon sector under conditions of free competition.

“The foregoing could cause disruptions in the natural gas supply chain causing price increases and deterioration in the conditions of natural gas supply, which would impact final consumers as the costs of said fuel are transferred to them,” the resolution read.

The judge also considered that serious distortions in the electricity production market would be avoided for the competitors of the Federal Electricity Commission (CFE), who would be obliged to acquire natural gas for its production with its competitor, granting an advantage over others, which could generate a unilateral price setting and without necessarily obeying criteria of efficiency, quality and reliability.