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? The Electricity Supply Act (StromVG) stipulates that Swissgrid is entitled to collect tariffs, which are paid by all electricity consumers in Switzerland. At the same time, Swissgrid receives auction proceeds from the sale of capacities available for energy exchange on the cross-border lines. A total of 41 lines connect the Swiss and the European transmission grid. However, Swissgrid is not able to use these auction proceeds freely; this is regulated by the ElCom.
In some cases, Swissgrid’s 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 together with their costs. Swissgrid calculates the tariffs based on forecasts. If Swissgrid collects too much or too little during a given year due to differences from the forecasts, these differences are balanced with higher or lower tariffs in the following years. ElCom monitors the tariffs collected by Swissgrid and the distribution system operators and can adjust these retrospectively.
The costs are borne by all
The costs for the secure transfer of electricity are therefore shared by all consumers of electricity in Switzerland. These costs include not only the expenses for maintaining and constructing lines but also those for operation, control energy (which is used to stabilise the grid) and remuneration for land owners whose properties are crossed by a line.
Besides this, Swissgrid is also subject to the public procurement system, meaning that major expenditures have to be put out to tender. The contract is then awarded to the most suitable service provider with the most cost-effective offer.
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 2022 a typical household with an annual consumption of 4,500 kWh will pay just over CHF 50, around 6 per cent of its electricity costs, to the transmission grid.
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