Jude Webber in Mexico City

In a blow for Mexico’s nationalist energy policy, the Supreme Court on Wednesday threw out a partial government attempt to rewrite electricity sector rules that it had argued were vital in times of Covid-19, saying it was an attempt to give “undue advantage” to state utility CFE.

The government had sought to ram through rule changes last May that private generators feared would squeeze them out of the market. Rocío Nahle, energy minister, had argued that the changes were vital to ensure reliability of power supplies during the Covid-19 pandemic.

The Supreme Court’s ruling came after Mexico’s anti-trust regulator, Cofece, challenged the rule changes on competition grounds. The measures had been on hold pending the ruling.

The government has presented a bill to Congress that would upend the current system, allowing CFE’s costlier plants to dispatch power into the grid before cheaper and cleaner renewables, and would attempt to rewrite some private power generation contracts.

A worker finishes detailing on a coffin at the Litomex factory in Ecatepec, Mexico

Analysts said it fast-tracked the bill anticipating the court’s negative ruling. With majorities in both houses of Congress, the ruling party has the votes needed to pass the bill, but analysts said it would face challenges on constitutional grounds as well as under Mexico’s free-trade treaty with the US and Canada.

Olga Sánchez Cordero, interior minister, who is deputising for President Andrés Manuel López Obrador while he convalesces from Covid-19, said it was a strategic imperative that the state be in the driving seat in the energy sector, with private participation subject to “certain limits and certain rules”.

César Hernández, a former energy undersecretary, tweeted that the court ruling would weaken the government’s ability to pass the bill. “Even with the votes there, it will be difficult for Congress to approve reforms that are openly unconstitutional.”

“Only the Federal Electricity Commission (CFE) can guarantee … the reliability of the system,” she told a news conference.

“Imagine an unreliable or interrupted or unstable electricity system in hospitals,” she added. “Just imagine for a second everything that is connected to the electricity during the pandemic, like ventilators.”