Swissgrid operates in a regulated environment, so its success cannot be measured solely by revenue or profit. The goal of the national grid company is to ensure secure, efficient and effective grid operation. Swissgrid was able to achieve this goal in the 2010 financial year: the transmission system was successfully operated without interruption. Ancillary service costs were reduced from CHF 691 million to CHF 416 million.

The majority of the services to be provided by Swissgrid are predefined in the Electricity Supply Act (StromVG). Expenses and income in those business areas are monitored by the Swiss Federal Electricity Commission (ElCom). The cost savings achieved in control power provision - the largest cost block in ancillary services – are the financial highlight of the 2010 financial year. The purpose of control power provision is to maintain grid stability. Swissgrid was able to halve these costs by implementing targeted measures, including a more comprehensive product range and the acquisition of other providers, and due to a lower price level on the European electricity markets.

Profit is limited

In contrast to companies which operate in free competition, Swissgrid's results are regulated to a large extent. These regulated results (EBIT = earnings before interest and taxes) are calculated as follows: All funds necessary for operation may be charged interest at a predefined rate. That interest rate is stipulated by ElCom each year based on the Electricity Supply Ordinance. In 2010, Swissgrid was able to generate a regulated operating result of CHF 3.5 million. The interest on borrowed capital and taxes are deducted from that result, and the remaining amount is the net profit or loss. In the 2010 financial year, Swissgrid achieved a total net profit of CHF 2.7 million.

Costs covered by tariff revenues

Swissgrid covers its own costs through tariff revenues. Tariff levels are reviewed by Elcom, and Swissgrid calculates the tariffs for the following year based on the previous year’s costs. The actual expenses and income usually deviate from that tariff calculation. The surplus or shortfall must be taken into account in future tariff calculations. Expenses in the 2010 financial year were higher than income, resulting in a total shortfall of CHF 80 million. The main reason for this was a Federal Administrative Court ruling announced in the summer of 2010, according to which Swissgrid may no longer charge ancillary service costs to power plant operators with a capacity of at least 50 MW. As a result, those power plants which lodged appeals with the Federal Administrative Court must be compensated for their previous payments.