Open electricity market attracts criticism

Power market ripe for change Keystone

Government plans to gradually open up the Swiss electricity market are attracting criticism ahead of a nationwide vote next June.

The law – to give industrial consumers and private households the freedom to choose their power suppliers – would be in line with the government’s policy of bringing Swiss legislation into line with that of the European Union.

As part of the new law, a national network is to be established to ensure that all suppliers have access to the grid.

At present, Switzerland has more than 1,200 electricity utilities, with many of these controlled by local government. More than 55 per cent of the country’s electricity comes from hydroelectric plants, with about 40 per cent generated by nuclear power stations.

Supporters of the planned changes say deregulating the control of electricity and opening up the Swiss market – and breaking down regional monopolies in power supply — would increase efficiency and lower prices.

However, Rolf Zimmerman, secretary of the Swiss Federation of Trade Unions in Bern, told swissinfo that this would not be the case.

“I don’t think the power sector was inefficient up till now, in fact it was very efficient because we had a 100 per cent reliable supply to consumers with very skilled workers employed in the power stations and the utilities,” explained Zimmerman. “If they say it will bring lower prices the experience in California has been to the contrary.”

The US state of California, which has deregulated its power market, has seen increased prices for consumers and blackouts. Price capped electricity retail suppliers within the state have found that they cannot afford to pay increased prices to power generators.

Lower prices for business

Florent Roduit, an executive board member of the Swiss Business Federation (economiesuisse), explained to swissinfo that their support for the changes to the power market in Switzerland rested on hopes that prices to business would be reduced after the changes.

“Economiesuisse thinks it’s very important for our country to open up its electricity market as soon as possible with the main aim of reducing prices for business,” said Roduit. “It’s important to know that the price of electricity for small or medium sized businesses is 50 per cent higher here than that paid by similar companies in Germany.”

Job losses

Zimmerman warned that merger fever would ensue following deregulation with foreign companies “cherry-picking” smaller Swiss utilities. This he said would result in up to 6,000 job losses in the power sector.

However, Elizabeth Benson, a United States-based consultant who advises on market deregulation, told swissinfo that power blackouts were unlikely, but some job losses would arise.

“With respect to inefficiencies, which I understand to mean breaks in service, blackouts or a lack of incentive to send power down the line, I see no evidence of that whatsoever in the US. In fact the incentive to move power is higher in a deregulated framework. With respect to job losses, this is a transitional period and there will be some people who do not continue in employment.”

Roduit feels that lower prices for business users would encourage more foreign investment in Switzerland; this in turn would mean job creation in other sectors of the economy.

“Foreign companies should be allowed to invest and compete in the Swiss market as long as the Swiss can compete in the foreign suppliers’ own market,” added Roduit.

Trade unionist Rolf Zimmerman also sees the need for change. But he feels liberalisation should be restricted to power generators not electricity suppliers.

“If you look at what is going on in Europe where you have this liberalisation of services, particularly in the energy sector, then it’s clear that Switzerland has to move in a certain way,” noted Zimmerman. “But we think that it should be enough to liberalise the wholesale market and not the retail supply market.”

This ain’t California

Elizabeth Benson believes Switzerland is going about its deregulation plans in just the right way to avoid the mistakes made in California.

“I think in general what they’re trying to do is potentially very effective,” said Benson. “By creating competition at the generation level they’ll bring in more suppliers into the market and that is going to create a competitive market.”

Benson added that Switzerland’s long-term approach to making the changes was also a more sensible way to move the market along. She felt that radical change brought about quickly could fail more easily, whereas the slowly-slowly approach of the Swiss government plans would make for a smoother passage for the changes in the market.

“Generally the objective is to bring in more competition into the market and the idea behind that is to bring prices down,” explained Benson.”Also it creates incentives for companies to build and continue the development of infrastructure.”

Government delays

The government’s delay in putting the changes to the power market to the people in a referendum has also attracted criticism from trade unions.

Zimmerman believes the government is playing for time to make a better case for its privatisation of the regional power monopolies.

However, the unions will also use the time to better put forward their case and an alternative partial-privatisation plan to bring Switzerland in line with the rest of Europe.

“We want to elaborate a certain alternative to the system they propose now and we will show as well that the system we have is very efficient and it shouldn’t be changed in a quick way,” added Zimmerman.

by Tom O’Brien