Swissgrid is not a conventional company. Although it is a public limited company, it operates in a highly regulated environment. As the national grid company, it operates critical infrastructure of public interest. This requires a unique business model based on a clear legal mandate. The legislator has prescribed this in the Electricity Supply Act (StromVG) and the Electricity Supply Ordinance (StromVV) and designed power transmission as a legal monopoly.
The backbone of the supply of electricity
As the owner and operator of the Swiss extra-high-voltage grid, Swissgrid is responsible for power transmission and therefore the backbone of the supply of electricity. This includes the non-discriminatory, reliable and efficient operation of the transmission system, as well as its sustainable and efficient maintenance. The renewal and demand-driven expansion of Switzerland’s extra-high-voltage grid are therefore considered amongst Swissgrid’s most important tasks. On the other hand, the fine distribution of the electricity down to the domestic power outlet is the responsibility of the distribution system operators.
Competition at the level of critical high-voltage infrastructure would be neither efficient nor sensible
An intentional monopoly
Due to the high operating costs and investments required for the construction of the transmission system, the legislator created a monopoly in the area of power transmission. The reason for this is that competition at the level of critical high-voltage infrastructure would be neither efficient nor sensible. In order to ensure that Swissgrid guarantees a secure supply of electricity throughout Switzerland despite its monopoly position, the Swiss Electricity Commission (ElCom) monitors compliance with the StromVG and StromVV. EICom is the independent state regulatory authority in the electricity sector. It regulates costs and prices and is allowed to issue rulings where necessary, against which there is a right of appeal to the Federal Administrative Court with the possibility of appeal to the Federal Supreme Court.
The Swissgrid tariff model
Swissgrid has to cover operating costs and make regular investments so that it can ensure a secure and functioning high-voltage grid for Switzerland. The Electricity Supply Act (StromVG) stipulates that tariffs may be charged in a precisely defined structure for this purpose. These include tariffs for grid usage, tariffs for general ancillary services and tariffs for individual ancillary services. Swissgrid calculates the tariffs based on forecasts. If Swissgrid collects too much or too little income in a year due to deviations from the forecasts, these differences will be balanced with higher or lower tariffs in the subsequent years. ElCom monitors the tariffs charged by Swissgrid and the distribution system operators, and can adjust them retroactively.
As a general rule, additional income must be used to reduce costs.
Additional revenue from electricity exchange
In addition to tariff revenues, Swissgrid collects income from auction 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. On the basis of this combination of European and Swiss interconnected operations, Swissgrid provides important services such as balance group and congestion management, as well as ancillary services (AS). In addition to representing Swiss interests, Swissgrid makes a further important contribution to ensuring the secure supply of electricity. Here, too, it is not Swissgrid but ElCom that decides on the use of income from auction. As a general rule, additional income must be used to reduce costs.
The costs of power transmission
The costs of power transmission are shared by all electricity purchasers in Switzerland. In relation to the maintenance and construction of lines, Swissgrid is subject to the public procurement system and must put major expenditures out to tender. The contract is then awarded to the most suitable service provider with the most cost-effective offer. Swissgrid’s costs also include the expenses for operation, control energy, which is used to stabilise the grid, and remuneration for landowners whose property is crossed by a line.
In 2023, the costs of Swissgrid’s transmission system amount to around eight percent of the total electricity price that the end consumer pays. A Swiss household with an annual consumption of 4,500 kWh will pay CHF 70 towards the costs of the transmission system operated by Swissgrid. Thanks to Swissgrid’s finely balanced business model, the Swiss transmission grid is now not only one of the most secure and stable in the world, but also one of the most affordable.