Parliament debates electricity liberalisation

The government's proposals for liberalising the electricity market in Switzerland are facing a tough challenge in parliament. The law has taken years to draft, but is expected to be trimmed, if not even drastically altered, by the assembly.

The government’s proposals for liberalising the electricity market in Switzerland are facing a tough challenge in parliament. The law has taken years to draft, but is expected to be trimmed, if not even drastically altered, by the assembly.

The government wants both industrial consumers and private households to have a choice in whom they draw power from. Competition would be introduced over a six-year transition period, with businesses benefiting first, and households last.

However, experience in other European markets shows that such a long transition period is difficult to manage, and already today, power utilities in Switzerland are chasing the estimated 110 big industrial customers who consume more than 20 Gigawatt hours annually, and who would first be eligible to choose their suppliers.

In order to guarantee third party access to all parts of the grid, the law foresees the establishment of a national network company. This idea is not popular with the utilities, but the government says there has to be an independent body permitting customers to access those suppliers offering the lowest prices, even if they are far away.

Ecological factors also enter into the debate. The newer hydro-electric operators are sitting on stranded investments and are demanding compensation. The very cheapest power, generated by coal-burning power stations in eastern Europe could be barred by an environmentally-based tax.

There is controversy about the way to deal with stranded investments, but the Swiss draft law is in line with a European Union directive of 1996. For the first three years, the Swiss law would achieve a market opening of only 21 per cent, but at the end of the six-year transition period, Switzerland would have an electricity market that is more open than demanded by EU rules.

Switzerland’s roughly one thousand power utilities are mostly owned by cantons and local authorities and generate 60 per cent of electricity by hydro-electric means, and the remaining 40 per cent by nuclear power.

By Peter Haller