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UPDATE 1-Mexican power bill takes aim at independent producers

(Adds details from bill, context)

MEXICO CITY, Feb 17 (Reuters) - A Mexican bill to strengthen the hand of the state in the electricity market aims to open the door to renegotiating and potentially terminating contracts with independent producers, the latest draft of the legislation showed Wednesday.

The fast-track bill was sent to Congress earlier this month by President Andres Manuel Lopez Obrador as part of his plan to give priority to state power utility the Comision Federal de Electricidad (CFE) over private power generators.

The latest version of the bill drawn up by the lower house energy committee, and seen by Reuters, said that “capacity commitment” contracts for electricity generation, purchase and sale signed with independent producers needed to be reviewed to ensure they met requirements to be profitable for the state.

“Where appropriate, these contracts must be renegotiated or terminated early,” the draft said.

Such contracts represented roughly 50% of capacity installed through private investment, industry sources said.

The provision is likely to provoke further opposition from private power producers, which were already furious with the bill that aims to prioritize the CFE in energy dispatch and eliminate its obligation to buy electricity through auctions.

Lopez Obrador is attempting to roll back a reform passed under the previous government that opened up the energy market to private capital, arguing it put the state at a disadvantage.

The head of the energy committee has said investments made under that reform would be guaranteed, and the draft bill said the changes did not “imply a violation” of an article in the constitution that ensures laws are not applied retroactively.

The bill said auto-supply generation permits which had abused the law should be revoked, though permission-holders could seek authorization again under the new legislation.

The draft also stated that once the bill had taken effect, authorities should implement its terms within 180 days. (Reporting by Adriana Barrera; editing by Richard Pullin)

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