The electricity price is made up of different components. Consumers pay not only for the electricity supplied, but also for its transport, among other things. As the national grid company, Swissgrid is responsible for part of the path followed by electricity. It is the owner of the Swiss extra-high-voltage grid and ensures a properly functioning and secure infrastructure, as well as the operation of the transmission system.
Swissgrid operates in a regulated environment. Its mandate is governed by the Electricity Supply Act (StromVG) and the Electricity Supply Ordinance (StromVV). The ordinance also specifies how Swissgrid may cover the costs of its services using tariffs.
What is the electricity price composed of? How much do end consumers pay for Swissgrid’s services? How are Swissgrid tariffs calculated? And how have they developed in recent years? This overview provides the answers.
One electricity price – several components
Roughly speaking, the electricity price is made up of three components. The energy tariff covers the costs of the electrical energy used by electricity consumers. These costs are charged to them by their energy supplier.
The costs of transporting and distributing the electricity from the power plant to homes or companies are covered by the grid usage tariff. This includes the costs for the construction, operation and maintenance of the grids. These costs are incurred by the distribution system operators (lower grid levels: high, medium and low voltage) and by Swissgrid (highest grid level: extra high voltage). The costs for the ancillary services, which Swissgrid requires in order to operate the grid safely and efficiently, are also covered.
In addition, fees are levied such as the grid surcharge for the nationwide promotion of renewable energies (e.g. the one-off remuneration for photovoltaic plants). Municipal and/or cantonal fees must also be paid (e.g. licence fees).
New price component in 2024: In 2024, the electricity price will include the new «power reserve» tariff for the first time. This covers the costs of the measures taken by the federal government to increase the security of supply in winter. These measures include the hydropower reserve. According to StromVV, these costs must be charged via Swissgrid.
A household with an annual consumption of 4,500 kilowatt hours (kWh) – 5-room flat with electric hob and tumble dryer (no electric boiler) – will pay on average approx. 30,49 cents per kWh of electricity in 2024. Energy accounts for around 50 percent, transport and distribution around 37 percent, and together the various fees account for around 9 percent of the electricity price. 4 percent now constitutes the costs of the measures taken to increase the security of supply in winter.
Of the total electricity price paid by end consumers, the costs for Swissgrid’s transmission system amount to just under 7 percent on average. A Swiss household like the one described will therefore pay about 92 Swiss francs in 2024. The costs for the power reserve amount to 54 Swiss francs.
Various electricity prices in Switzerland
Swissgrid charges its tariffs, which are standardised throughout Switzerland, to the distribution system operators and end consumers directly connected to the transmission system. Electricity consumers do not receive a bill directly from Swissgrid. The distribution system operators' bills include Swissgrid’s costs. These are shown as grid usage tariffs, either separately or cumulated, along with the distribution system operators' grid costs. The grid usage tariff can vary depending on the region. For example, the topology of the supply region influences the level of expenditure for the expansion and maintenance of each distribution system.
The energy tariff also varies depending on the region; some energy suppliers own power plants and supply their customers with electricity they produce themselves, while others buy electricity on the market or from an upstream supplier. The energy tariffs are completely independent of Swissgrid's tariffs.
How the tariffs for the Swiss transmission grid are created
Swissgrid charges various tariffs to cover its costs: three tariffs for grid usage, one tariff for general ancillary services and two tariffs for individual ancillary services. The structure of the tariffs is precisely stipulated in the Electricity Supply Ordinance (StromVV).
In 2024, additional costs will be billed via Swissgrid for the first time. These are incurred for the measures taken by the federal government to increase the security of supply in winter.
Every year, Swissgrid must announce the tariffs for the following year by the end of March. Therefore, tariffs are calculated on the basis of assumptions about expected costs and revenues. In its calculations, Swissgrid relies, among other things, on the price trends forecast for the international power markets.
Tariffs for grid usage
The tariffs for grid usage cover the costs for Swissgrid’s core business, i.e. the renewal, expansion and maintenance of the grid, as well as the costs of operation and monitoring via the control centres.
As stipulated in the StromVV, Swissgrid divides these costs into three different tariffs and bills them to the distribution system operators and consumers directly connected to the transmission system. The distribution system operators then calculate the tariffs for their customers or the downstream distribution system operators on the basis of the tariffs charged by Swissgrid and their own grid costs. These costs are usually summarised in the electricity bill under «Grid usage». This means that the charge for use of the grid billed by the distribution system operator incorporates its own grid costs, as well as all pro rata grid usage costs for the upstream grids, including those of Swissgrid.
The tariff for general ancillary services
The tariff for general ancillary services largely covers expenditure for the control reserve. Swissgrid uses this to ensure a balance between production and consumption and therefore a frequency of 50 Hertz.
Control reserves are held in readiness for Swissgrid by various providers, such as power plants, who are remunerated for this. Swissgrid procures control reserves on various control power markets, as it is not allowed to own power plants. The remuneration of power plants accounts for the largest share of the costs. The control reserve is activated if unforeseen oscillations occur, such as in the case of a power plant failure.
The general ancillary services tariff – expressed in cents per kilowatt hour – is charged directly by Swissgrid to all distribution system operators, who pass it on to their end consumers. The tariff is usually shown separately on the electricity bill.
Tariffs for the individual ancillary services
The costs of the individual ancillary services are covered by two tariffs. The first is the tariff for active power loss. This occurs during the transport and transformation of electrical energy. As Swissgrid is not allowed to own any power plants, it procures the electrical energy needed for the compensation of active power losses on the power market. The other tariff covers the costs of procuring reactive energy, which is necessary to achieve an optimal voltage in the grid.
The costs are billed to the distribution system operators, power plant operators and consumers directly connected to the transmission system. The distribution system operators pass these costs on to electricity consumers. They are not usually shown separately on the electricity bill, but are instead subsumed into the «grid usage» tariff.
The new «power reserve» tariff
The upheaval on the energy market and the possible electricity shortage in Switzerland in the winter of 2022/23 have prompted the Federal Council to take various measures to increase the security of supply.
These include the establishment of what is known as a hydropower reserve. Swissgrid was commissioned by the federal government to conduct the auction for this reserve and to coordinate the use of the reserve. The framework conditions for this were stipulated by the authorities. Swissgrid is also responsible for a possible request for the emergency power groups contracted by the federal government, which can be used in the event of a power shortage. Furthermore, the federal government has arranged for the construction or operation of temporary reserve power plants.
The costs of these measures, which Swissgrid cannot influence, must be covered by the new power reserve tariff and billed via Swissgrid in accordance with the Federal Council’s ordinance. For 2024, these costs will be charged to consumers for the first time.
In addition to the tariffs that Swissgrid is allowed to charge under the law, Swissgrid collects proceeds from the auctioning of capacities that are available for energy exchange on the international interconnection lines. A total of 41 lines connect the Swiss transmission system with the European one. The auction proceeds fluctuate and depend on the electricity price differences across various countries. However, Swissgrid is not free to decide on the use of these auction proceeds; this is also decreed by ElCom. These auction proceeds ultimately benefit electricity consumers, either through tariff reductions or by financing the transmission system.
What if the forecasts are not correct?
Swissgrid announces the tariffs for the following year by the end of March. The tariffs are therefore always calculated on the basis of forecasts. Deviations from the forecasts mean that Swissgrid either collects too much or too little. Swissgrid compensates for these deviations by charging higher or lower tariffs in the subsequent years. The procedure is prescribed by the StromVV and reviewed by the state regulatory authority, the Swiss Electricity Commission (ElCom).
The development of Swissgrid tariffs
Swissgrid's tariffs account for only a small proportion of consumers' electricity bills. Up until 2021, the average burden placed on a household by Swissgrid tariffs remained the same or even decreased slightly. Since 2022, this has increased significantly, mainly due to high prices on the energy markets.
Swissgrid’s tariffs have showed mixed trends in recent years. Tariffs for grid usage, for example, have not changed much. These cover Swissgrid’s core business: the expansion, maintenance and operation of the Swiss transmission grid. The development of these tariffs is less dependent on exogenous factors.
The tariff for general ancillary services is largely determined by price trends on the international power markets. The reason for this is as follows: the largest share of the costs is attributable to the procurement of control reserves, which Swissgrid uses to ensure the secure and stable operation of the grid. Swissgrid procures this power on control power markets, as it is not allowed to own power plants. In order to increase liquidity and competition in the market, Swissgrid has introduced market-based procurement mechanisms and continuously expanded its product range. However, these measures were unable to prevent the costs of control reserves from increasing significantly in the current price environment, which is characterised by sharply rising prices.
The same development can be seen in relation to the tariff for individual ancillary services – the tariff for active power loss. Swissgrid must also procure the electrical energy to compensate active power losses, which occur during the transport of electricity, for example, on the power market. Swissgrid has developed a procurement strategy to counteract the volatility of electricity prices. For example, services are procured in individual tranches and sometimes far in advance.
Swissgrid is firmly committed to keeping the financial burden on electricity consumers as low as possible. More information on tariff developments in our interview with Andreas Schreiber.
Who monitors the tariffs?
In 2008, the Electricity Supply Act (StromVG) came into force, creating the conditions for the development of a competitive electricity market in Switzerland. One requirement was the ‘demerger’: the separation of generation, transmission, distribution and the end-user business. This act and the associated Electricity Supply Ordinance (StromVV) thus also created the legal basis for Swissgrid, which is responsible for the transmission of electricity and therefore the extra-high-voltage grid. The transmission system is a natural monopoly. This prevents the infrastructure from having to be built several times by competing companies.
As the owner of the extra-high-voltage grid, Swissgrid thus operates in a highly regulated environment. As an independent, state regulatory authority in the electricity sector, the Swiss Electricity Commission (ElCom) monitors compliance with the StromVG. Among other things, ElCom acts as a «price monitor»; it monitors the tariffs of Swissgrid and the distribution system operators and can adjust them.
More information on Swissgrid’s regulatory business model.