EconomyFinancialThe keys behind the millionaire sanction that the CRE...

The keys behind the millionaire sanction that the CRE imposed on Iberdrola

Iberdrola was the recipient a few weeks ago of what could be the highest penalty ever imposed on an energy company in the country. The order of the Energy Regulatory Commission (CRE) was for the Spanish company to disburse a sum for allegedly selling electricity from one of its plants located in Nuevo León that operates under the self-supply model.

The announcement of a sanction to one of the companies that has one or more assets operating as self-supply was only a matter of time. Not even President López Obrador likes this model that was born almost 30 years ago under the premise of granting generation permits to private companies in order to meet the electricity demand of industrial clients that the CFE could not, at that time – when the North American Free Trade Agreement was being negotiated – guarantee supply.

The beginning of the investigation of the regulator to the Spanish company began at the same time as the great changes in the sector. The file made public by the CRE reveals that the investigation began at the end of 2020 at the express request of the state-owned CFE. Already in January of this year, the regulator gave the first indications of opening an investigation into Iberdrola, at that time and unanimously by the plenary session, it opened a file on the multinational for violations, it said, of article 36 of the Public Service Law. of Electric Power, which states that holders of a self-supply permit cannot sell electricity to third parties.

At the same time that the opening of the investigation was announced, an open parliament was held in the Chamber of Deputies to discuss the constitutional reform. The document, which was finally rejected, proposed the almost immediate termination of all contracts with private parties that were held in past six-year terms for, as the document argued, representing bad business for the State. In particular, the initiative pointed towards the express termination of self-supply contracts.

The constitutional change failed the test in Congress and was scrapped. And immediately afterwards, President López Obrador issued an invitation to the private companies holding a self-supply permit “I call on these companies to sit down and see how we are going to solve the problem because I have to apply the law, because if we don’t I become an accomplice”, he said in one of his conferences at the end of April. Also in that month, the federal administration reported that it would begin a review of about 110 self-supply permits that, in its opinion, do not comply with the legal framework and left open the possibility of revoking them.

But while the president launched the invitation to private companies in order to negotiate and avoid criminal complaints, according to what he said, the regulator had already concluded the investigation and Iberdrola had already been informed of the result, according to the public file. Since last February, the document reads, the Spanish company – which has capital from large funds such as BlackRock – had requested a court to suspend the sanction procedure, but the appeal was revoked.

The regulator has based the sanction on a regulation that stipulates that selling electricity from self-supply plants could represent a sanction of 100 times the minimum wage in Mexico City for each kilowatt-hour generated in the asset. Iberdrola’s Dulces Nombres plant, which has been the reason for the sanction, can generate up to 1,008 megawatts, according to company information. The Commission has used as the main argument for its sanction a series of invoices provided by the SAT – ranging from January 1, 2019 to August 31, 2020 – and that the Spanish company allegedly delivered to its electricity purchasing customers. The data on the amount of the invoices is not public, but Iberdrola has argued, according to the file, that the SAT and the CRE violated fiscal secrecy and therefore the evidence is not legal. The regulator, for its part, says that it carried out the investigation merely based on official documents.

The problem that Iberdrola has in its Dulces Nombres power plant did not begin at the same time as the sanction was announced. Last January the plant in Nuevo León suffered great difficulties, the power generation permit expired and the regulator denied it –since last November– the authorization to continue its activities. Already in February the asset was in limbo, the two plants that comprise it were disconnected from the system and with it, some large industrialists. Iberdrola obtained this permit in 2002 and with this plant it supplies electricity to companies such as Cervecería Cuauhtémoc Moctezuma, Kimberly Clark and Ternium.

The president quickly responded that the CFE would have the capacity to provide electricity to the private sector and that there would not be a further crisis. Already in March, the Spanish obtained a definitive suspension so that the asset continues in operation while the situation of Dulces Nombres is determined in depth.

As all of that unfolded and the asset disconnect remained in the headlines, the parties continued their negotiations of an even larger issue within. Iberdrola argues, according to the file, that it was not given the opportunity to defend itself. Specialists in the sector agree that the sanction is disproportionate.

But for now, the Spanish has obtained a definitive suspension for not paying the sanction during the time that the trial lasts. The president has threatened to investigate the judge who granted the measure to the multinational.

The first hearings are scheduled for early September and industry lawyers say the case could be resolved in the next six months to a year.

Iberdrola has already gone from being the company most mentioned by President López Obrador in his morning conferences to being the first private company to be subject to one of the main objectives of the federal administration in energy matters: the attempt to put an end to societies self-sufficient.

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