Swissgrid’s share of the electricity bill

Author: Stephanie Bos


During the first quarter, the final electricity bill for the past year drops through letterboxes across Switzerland. It then becomes clear how much electricity was actually consumed and what costs are incurred as a result. In addition to the payment slip, an overview of the services provided is enclosed with the bill. This shows exactly what the consumer is paying. It becomes apparent that the electricity actually used is only part of these costs, because the electricity price is made up of various components. Among other things, consumers pay for the transport of electricity and to ensure that the electricity system can be operated securely and efficiently. This is where Swissgrid’s tariffs come into play.

The tariffs explained

Swissgrid calculates various tariffs for its services every year so that it can cover its costs. Simply put, there are three different components: grid usage, general ancillary services and individual ancillary services. How Swissgrid calculates its tariffs is specified in detail in the Electricity Supply Act and the Electricity Supply Ordinance.

The tariff for grid usage covers Swissgrid’s core business. This comprises the operation, maintenance and expansion of the Swiss transmission grid.

The tariff for general ancillary services covers expenditure for control reserves in particular. Swissgrid uses these to balance production and consumption and ensure a frequency of 50 Hertz. This is essential for a functioning grid. Power plants hold control reserves that are activated in the event of unforeseen oscillations. As Swissgrid is not allowed to own any power plants of its own, this power is procured on various balancing markets. These very procurement costs account for the largest share of the costs.

On the one hand, the tariff for individual ancillary services covers the costs for the procurement of active power loss. This occurs during the transport and transformation of electricity and must be replaced. On the other hand, this tariff includes the costs for the procurement of reactive energy. This is necessary to achieve an optimal voltage in the grid. Swissgrid purchases both services on the power markets. The procurement costs are therefore the biggest cost factor here too.

For the 2024 tariff year, a new tariff is included for the first time: the power reserve tariff. Swissgrid uses this to offset the costs of the measures taken by the federal government to increase the security of supply in winter. These measures include the hydropower reserve, the hook-up of the reserve power plant in Birr and the operational management of the emergency power groups.

Swissgrid does not bill consumers directly. Swissgrid tariffs are charged to distribution system operators, among others. In turn, they calculate their own tariffs based on their grid costs and the tariffs charged by Swissgrid. Swissgrid’s tariffs are therefore included in the costs of the distribution system operators and are not shown separately. They are added to the grid costs of the distribution system operators and included on the bill in the overview of services under «Grid usage» and «Ancillary services».

How Swissgrid calculates its tariffs is specified in detail in the Electricity Supply Act and the Electricity Supply Ordinance.

Avoiding differences

Swissgrid publishes its tariffs for the following year by the end of March each year. The 2023 tariffs were announced in 2022, the 2024 tariffs in 2023, and so on. But how do we calculate future costs? The simple answer is: using approximation. The tariffs are calculated on the basis of assumptions about expected costs and revenues. To this end, Swissgrid relies, among other things, on forecasts of price trends on the international power markets. By their very nature, these cost assumptions do not correspond exactly to the actual costs. Unforeseeable events, such as the outages at some French nuclear power stations last autumn, can drive up electricity prices. The legislator took this into account when drafting the Electricity Supply Act and its Ordinance and defined a solution.

The resulting differences between the cost assumptions and the actual costs are called volume – and tariff – related timing differences. Swissgrid must reduce these differences over the subsequent years. If the actual costs exceed the tariff income, this results in a deficit. This will be reduced over the subsequent years by means of tariff increases. If, on the other hand, the tariff income exceeds the effective costs, a surplus is created. This will be reduced over the subsequent years by means of tariff decreases.

Unforeseeable events, such as the outages at some French nuclear power stations last autumn, can drive up electricity prices.


Author

Stephanie Bos
Stephanie Bos

Communication Manager


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