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    Energy justice is energy sovereignty


    June 6, 2022 - CE Noticias Financieras

     

      MEXICO CITY (Proceso) - The idea of "energy sovereignty" is very present in the international debate on the different modalities of energy sector policies. In Spain and France, to mention just two very notorious cases, the governments' positions have been clear in their desire to modify the state of affairs in order to depend less on free market models.

      In the case of France, the re-elected government seeks to regain control of production to ensure energy independence through the nationalization of companies in that sector.

      In the case of Spain, the government is negotiating, at the European level, an "energy island" that would allow maximum prices to be set in the electricity market in the region. The energy price increases generated by the war in Ukraine are the most recent reminder of the risks of subjecting the strategic electricity sector to the vagaries of the market.

      In Mexico, there is a clear political questioning from the federal government about the profits of private corporations (national and international) and the models of self-supply and "onerous" contracts that the electricity reforms of 1992 and 2013 generated, since they substantially affect the country's public finances.

      With that idea as its argumentative heart, the current administration has defended a project that returns energy sovereignty and operational power to the state-owned energy company (CFE).

      The 2014 energy reform has been framed in a discourse of openness and globalization of markets, but has made invisible even more those who have been substantially affected by this energy management model: the agrarian and indigenous communities, who have had to endure abuses and systematic violations and abusive corporate practices, already present before this reform, but enhanced with these new "rules of the game".

      In this "new" vision of the sector, which looks at competitiveness as the supreme value to be achieved, illegal and abusive corporate practices have been consolidated.

      The cases of abuses are growing and are documented: lack of real mechanisms for community consultation, lack of information on projects and their social and environmental effects, stigmatization and attacks on human rights defenders, community division of the social fabric, violent dispossession of land, fabrication of illegal contracts, among a long etcetera.

      In summary: the opening of the electricity sector to free competition and the arrival of renewable energy projects has caused indigenous and agrarian communities to witness "energy transitions" through violations of their rights and the dispossession of their lands.

      The only beneficiaries are those who have twisted laws, those who have grabbed more land and those who receive "payments" from companies, which has accentuated the pre-existing inequality.

      How can this logic of injustice be turned around? One way is to provide evidence, through cases, that allows us to broaden the perspective to fundamentally question the current model of energy production. The case of the community of Unión Hidalgo, Oaxaca, is exemplary and illustrative in this regard.

      The case begins in January 2017 when CFE Suministrador de Servicio Básicos (CFESSB) and Eólica de Oaxaca SAPI de CV, Mexican subsidiary of the French company Électricité de France (EDF), entered into an electricity hedging contract for the purchase and sale of energy and clean energy certificates for 818 thousand 264.52 MWh, for an annual cost of 572 million 609 thousand 625.29 pesos.

      The contract also provides for CFESSB's obligation to pay Eólica de Oaxaca a bonus to cover the costs of the electric energy transmission tariff and the operating tariff of the national energy control center associated with the energy produced, up to the contracted energy; that is, the cost of transmitting and operating 818,264.52 MWh.

      In order to comply with the power purchase agreement, Eólica de Oaxaca was obligated to build, operate and maintain the Gunaa Sicarú power plant, from which it can generate the amount of electric energy with the clean energy certificates established in the agreement.

      The contract did not establish the construction date of the power plant, but the power generation permit E/1922/GEN/2017 granted by the Energy Regulatory Commission, which recently fined the Spanish Iberdrola for allegedly irregular practices in the self-supply model, foresaw the start of construction on December 1, 2017 and the completion date for May 31, 2019, starting commercial operation on June 1, 2019 or, if applicable, whichever results from the extensions made in accordance with the assumptions established in the contract.

      However, under the terms of the contract, under no circumstances may the commercial operation date be modified to be later than January 1, 2022, a situation that has already occurred, since the Gunaa Sicarú project has been detained by order of a federal court that ordered the Ministry of Energy to carry out a consultation procedure to obtain the consent of the members of the community of Unión Hidalgo, in accordance with the highest human rights standards.

      In this context, the CFESSB can terminate the contract, without liability for the parties, by simply notifying the company Eólica de Oaxaca, without the need for a judicial declaration.

      This situation does not require an interpretation exercise since the clauses of the contract clearly establish the termination assumption regarding the terms and terms for the fulfillment of the obligations. Even in a possible scenario of an arbitration claim for forced compliance of the contract by Eólica de Oaxaca or its parent company EDF, there is no possibility that a panel would be right and force CFESSB to keep the contract in force, since the term for the entry into operation of the plant and, therefore, the delivery of energy to the buyer, expired on January 1, 2022.

      In the case of the Gunaa Sicarú project, not even the costs for transmission and operation are covered by the company, in addition to the fact that the project has been questioned by the human rights defenders of Unión Hidalgo, who have undertaken jurisdictional and non-jurisdictional actions, at the national and international level, for the series of documented violations of their human rights, as well as for a series of irregularities in the signing of individual contracts for the usufruct of lands that are social property.

      The CFE has the opportunity today to terminate a disadvantageous contract that is detrimental to the nation's assets due to its abusive clauses but, above all, it has the historic opportunity to terminate a project that has repeatedly violated the human rights of the community of Unión Hidalgo.

      The global debate on the different modalities of energy sector policies is not only about "energy sovereignty", but also includes the urgent dimension of achieving "energy justice", as the case of Unión Hidalgo shows.

      It is up to the CFE to account for this.

      This analysis is part of the 2379th issue of the printed edition of Proceso, published on June 5, 2022, whose digital edition can be purchased at this link.

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