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Electricity companies promise to cut costs ahead of privatisation

Electricity companies are on the charm offensive ahead of privatisation later this year

(Keystone)

Large companies in Switzerland have already started benefiting from a drop in electricity prices ahead of the official privatisation of the industry later this year.

Anticipated competition is driving energy suppliers to offer promises of future discounts in order to lure new clients and hold on to existing ones.

Although they cannot legally provide electricity to new clients until the market is liberalised, distributors can promise rebates for the future.

Competition between electricity providers has already led to discounts of up to 30 per cent for the nation's major consumers.

According to a survey conducted by the Swiss news agency, ATS, Switzerland's top 120 electricity users, who consume at least 20 million kilowatts per year, have signed long-term contracts with the country's six major energy providers.

So far, promises of future discounts seem to be effective in retaining customers. Energy suppliers say 90 per cent of their clients are staying loyal to them.

But according to the survey, suppliers in French-speaking Switzerland have been somewhat less aggressive in terms of slashing energy prices, resulting in a loss of clients.

The Olten-based energy supplier, Atel, has successfully lured UBS Bank away from Avenis Trading in canton Fribourg. Avenis also lost Migros to Watt-Suisse.

However, the majority of Avenis' other major customers are sticking with the provider.

Over the past couple of months, electricity suppliers have also been turning their attention to a new group of potential clients made up of medium-sized companies. In theory, these companies will not have access to the open market until 2006.

Axpo, Switzerland's largest distributor, has already signed provisional agreements with around half of the companies whose consumption is between 5 and 10 gigawatt hours.

The current discounts, however, do not guarantee that prices will continue to drop once the electricity market is officially privatised. In Germany, where the market was opened up in 1998, the price of electricity has continued to climb after an original drop.

swissinfo with agencies

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