Electric power prices rising sharply in Switzerland
The Federal Electricity Commission (ElCom) predicts a significant increase in electricity tariffs next year and possible supply disruptions for the coming winter.
The trend in wholesale electricity prices shows an unprecedented increase since August 2021 due to soaring prices in Europe due in large part to higher gas prices, which have risen massively in the wake of the Ukraine-Russia war. The development was also influenced by the sharp increase in coal and CO2 prices as well as the below-average availability of French nuclear power plants in recent months.
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Repercussions on tariffs
With some delay, in 2023 the price increase in the market will also affect universal service end customers, since many distribution system operators purchase much of their electricity in the market. The higher purchase costs will then be passed on to the tariffs paid by universal service customers. At present, it is difficult to make predictions about the magnitude of increases in energy tariffs of distribution system operators in 2023 partly because differences are expected among different suppliers. Any increase in tariffs depends not only on further price development in the market, but also on the relative purchasing strategy and production portfolio of electric utilities (ESAs). In general, it can be said that the increase in tariffs will be inversely proportional to an electricity supply company’s own production share and the share of energy purchased in the market in the long term.
In addition, it should be considered that the share of energy in the electricity tariff of an average household accounts for about 38 percent. The electricity tariff is composed of the energy price, the grid utilization fee, municipal and cantonal taxes, and the federally collected grid surcharge. Price increases in the wholesale trade primarily affect the energy price.
ElCom survey on planned increases in energy tariffs
In May 2022, ElCom conducted a survey on planned tariff increases among 613 electric utilities (return: 172 AAE responses). According to the results, for the next tariff year, depending on the purchasing profile, most network operators expect an average of about 47 percent (weighted) increase in energy tariffs. This will affect large consumers and households equally. For a household with five rooms and an average annual consumption of 4,500 kilowatt-hours this would translate into an increase in the price of electricity from about 21 cents per kilowatt-hour in 2022 to just under 25 cents per kilowatt-hour in 2023, or additional costs of about 180 francs per year. Companies with an annual consumption of 150,000 kilowatt-hours must budget for additional costs of about 6,000 francs (excluding VAT). In individual cases, however, the differences may be even greater.
The final electricity prices for universal service end customers will be submitted by suppliers by the end of August to ElCom, which will make them public in early September.
ElCom points out that within the existing legal and regulatory framework, electricity supply companies have the option of taking voluntary measures to mitigate price increases. Energy produced in Switzerland from renewable sources, for example, could be charged at cost price instead of market price, profits could be reduced in the short term, and shortfalls in coverage from previous years written off, with no impact on tariffs, instead of being included in 2023 tariffs.
Security of supply winter 2022/2023
For next winter’s security of supply, not only the availability of indigenous nuclear power generation but especially the export capacity of neighboring countries are important.
Due to the expected low availability of French nuclear power plants even in the coming winter months, it is likely that the volume of imports from France will be much lower in that period and the prices for winter 2022/23 are much higher than those charged by Germany and Switzerland. Therefore, Switzerland’s structural import needs of about four terawatt hours in the winter half of the year will most likely have to be covered mainly by imports from Germany, Austria and Italy. However, the export capacity of these countries is in turn highly dependent on the availability of fossil fuels.
However, the good availability of Swiss nuclear power plants and reduced consumption in industry in the face of persistently high prices are mitigating factors. In the run-up to next winter, preliminary work has also begun to secure a hydroelectric reserve for the first time in addition to advance purchase of control power.
Until next winter, therefore, several uncertainties remain regarding the supply situation.
At the annual press conference, ElCom also presented its Activity Report and Supply Quality Report 2021. The documents can be viewed on ElCom’s website (www.elcom.admin.ch).
ElCom in Brief
The Federal Electricity Commission (ElCom) is the state and independent supervisory authority of the electricity sector. It supervises compliance with the Electricity Supply Act and the Energy Act and issues the necessary decisions in this regard.
ElCom supervises electricity prices and decides as a judicial authority in case of divergences concerning network access. It also monitors the situation from the point of view of electricity supply security and regulates matters concerning the transportation and international trade of electricity. Finally, ElCom decides on disputes arising from remuneration for the take-back of electricity fed into the network as well as disputes between network operators and their own consumers. ElCom members are appointed by the Federal Council and are independent of the electricity industry.
ElCom is the state and independent regulator of the electricity sector. It supervises compliance with the Electricity Supply Act and issues necessary decisions. ElCom supervises electricity prices and decides on divergences related to Network Access.
Source: Elcom ch