The Mexican Electrical Workers Union immediately called a protest march against the shuttering of Luz y Fuerza del Centro, a supplier for the center of the country.
The government tried to soften the blow by offering two and a half years' salary to workers who accept a buyout within one month, Labor Minister Javier Lozano told a press briefing.
The union, voicing shock, said it was preparing a response on behalf of its 44,000 active workers and another 20,000 retirees, even as thousands of its workers marched in protest outside the Labor Ministry.
A union delegation, led by Fernando Gomez Mont, entered the ministry for talks, but left with no agreement reached.
Service has not been interrupted for customers of the power company.
The government announced in a decree just after midnight on Sunday that it was eliminating the loss-making Luz y Fuerza del Centro.
Union leader Martin Esparza demanded that the government revoke the decree, and that it pull federal police and army troops from the company's facilities.
"The best way to solve this problem, which we workers did not cause, is to maintain the source of jobs," Esparza told local media.
The government said Luz y Fuerza was not being privatized, and that the Compania Federal de Electricidad, which supplies the rest of the country, now would do so in central Mexico as well.
There were no clashes reported when almost 1,000 federal police moved into the company's facilities late Saturday.
Between 2003-2008, Luz y Fuerza had earnings of some 17 million dollars and outlays of more than 32 million dollars.
Finance secretary Agustin Carstens said the government could expect to save 1.49 billion dollars by firing Luz y Fuerza's workers.