While Swissgrid is a public limited company, its business model is completely different to those of other companies. Some of them produce goods, such as chocolate or pocket knives, and others, such as insurance companies or banks, provide services. Swissgrid, in contrast, operates the extra-high-voltage grid, the backbone of the electricity supply and a critical infrastructure, based on a legal mandate.
The value chain in the electricity industry is broken down into the areas of production, distribution, consumption and transfer. As the owner and operator of the Swiss extra-high-voltage grid, Swissgrid is responsible for the latter. This grid transfers electrical energy within Switzerland in addition to importing and exporting this energy, so it is absolutely essential for citizens and the economy. By contrast, the fine distribution of the electricity down to the domestic power socket is the responsibility of the distribution system operators.
While numerous suppliers of chocolate or insurance policies compete freely in Switzerland, Swissgrid is the only transmission system operator, so there are no market mechanisms that regulate costs and prices. This task is taken over by the regulator: the Swiss Electricity Commission (ElCom) supervises Swissgrid’s business activities.
Tariffs ensure the high availability of the transmission grid
Swissgrid has to cover operating costs and make investments so that it can ensure a secure and functioning grid for Switzerland. How does the grid company finance these services? Legislation stipulates that it is entitled to collect tariffs, which are paid by all electricity consumers in Switzerland. At the same time, Swissgrid also receives auction proceeds from the sale of electricity transport capacities along the 41 cross-border lines that connect the Swiss and the European transmission grids.
In some cases, these tariffs are stated directly on the electricity bill, while in others they are charged to the distribution system operators, who pass them on to their customers. These Swissgrid operations are also supervised by ElCom: the tariffs for the coming year are calculated based on the planning. Both these tariffs and the utilisation of the auction proceeds are subject to the regulator’s approval. If Swissgrid collects too much or too little via the tariffs during a given year, these differences are balanced with higher or lower tariffs in the following years.
The Swiss transmission grid is currently one of the most secure and stable electricity grids in the world. And, in this case, Swiss quality has even proven to be very affordable for individuals: for example, in 2020 a typical household with an annual consumption of 4,500 kW/h is paying just over 44 francs, around 5% of the electricity costs, to the transmission grid.