Liberalisation seen as inevitable

Swiss energy analyst Stephan Vaterlaus agrees with energy minister Moritz Leuenberger that electricity liberalisation is inevitable.

Vaterlaus works in the Bern office of Plaut Strategy business consultants, which counts a number of Swiss power companies among its clients.

“We are in the process of opening the electricity market throughout Europe, including Switzerland,” Vaterlaus told swissinfo. “The only question is whether we have a controlled process or a free for all.”

And Plaut believes the Swiss model for liberalisation can be fair to everyone involved in the electricity business, from providers to consumers.

“At the moment the system is not fair,” he explained, “because a producer of cheaper energy can be denied access to the grid by the company who owns the grid. Under the new law everyone will be allowed access to the grid under the same conditions.”

Rural reassurance

Furthermore, Vaterlaus points out that the proposed legislation will provide protection for rural communities who fear they may end up paying higher prices for their energy.

“The new law guarantees provision of electricity to everyone in Switzerland,” Vaterlaus explained. “That’s not guaranteed now. And there is a clause that allows the government to reduce price differences if they vary too greatly between communities.”

Price question

But Vaterlaus is not prepared to go along with those supporters of liberalisation who claim that electricity prices could fall substantially.

“I think prices may fall a little bit in the short term,” Vaterlaus said. “But in the long term I just can’t say what will happen. That’s the point of a free market; prices can fall, and they can rise.

“But consumers certainly should not expect the major price reductions which we saw following the deregulation of the telecommunications industry.”

Unfair comparisons

Vaterlaus also believes that comparisons with the state of California, where deregulation went so spectacularly wrong, are not appropriate.

“You can’t compare the European liberalisation process with California,” he said. “For a start retail electricity prices were fixed in California – only wholesale prices were free to change.

“So of course the consumer didn’t see if he was using too much electricity and should have been paying more. What that meant was that wholesale prices went up, and the power companies had big problems delivering the electricity.

“In California there wasn’t enough production capacity for electricity, whereas here in Switzerland we actually have too much. In the long term production will have to go down, but we have a few years to learn to live with that.”

Consumer choice

Vaterlaus hopes the liberalisation process will bring welcome choices rather than too many confusing options for consumers.

“Some consumers will want to buy the cheapest power available,” he said. “Others probably will find it too complicated, but at least everyone will be able to choose.”

“For example, if you want to buy only green electricity,” he continued, “you will be able to do it. And this sort of choice is very important in an open market.”

by Imogen Foulkes