“It is essential that this deal take into account the realities of our municipal services”

In Bern, the debate is becoming electric. For a few weeks now, notably since the presentation of the clauses of the electricity agreement envisaged between Switzerland and the European Union, criticisms have been flying against a text manifestly more controversial than expected.

At the heart of the current discord: market liberalization. “From the entry into force of the electricity agreement, all consumers will be able to freely choose their supplier and will no longer be tied to the basic supply defined today by the local distribution network operator,” the Federal Department of the Environment, Transport, Energy and Communications (DETEC) said in a statement.

Among the most virulent political voices against this agreement is Pierre-Yves Maillard. “The actors of a fully liberalized electricity market would have an interest in creating a shortage and driving up prices. Consequently, the agreement would lead to strong tariff fluctuations, speculation and power outages,” says the current president of the Swiss Trade Union Federation. Conversely, Aline Trede, head of the Green parliamentary group (BE), considers this agreement with the EU indispensable for the energy transition.

As the parties begin to squabble over the subject, the occasion is ideal to probe the sector through a series of interviews with key players. For the second installment of this series, we this time hand the mic to Ronny Kaufmann, CEO of Swisspower, a strategic alliance representing 19 municipal industrial services and regional supply companies in Switzerland.

First, what is your position on this agreement? Do you still consider it as essential for Switzerland's energy future?

I do not yet know the details of the agreement and can therefore only speak with that reservation. I nevertheless assume that the Federal Council has negotiated a good electricity agreement. It is essential for us that the implementation of this agreement takes into account the realities of our municipal services: changes within and outside the framework of the basic supply must, for example, remain compatible with supply planning horizons.

One source of discord concerns market liberalization, which would represent a major obstacle to the basic supply… But is this basic supply really a financially attractive option for the distribution network operators?

The universal service is an integral part of public service. This is not about maximizing profits, but about guaranteeing a quality supply at a fair price. From a business perspective, energy suppliers must be able to generate a reasonable return, including within the framework of the basic supply. It is therefore legitimate that the agreement be implemented in such a way that transitions to or from the universal service are accompanied by appropriate costs.

What is your reaction to the multiple interventions of Pierre-Yves Maillard denouncing the agreement — interventions in which he evokes a risk of underinvestment in future electricity generation capacities in Switzerland, but also excessive speculation, even an agreement that would slow “the fight against climate change”?

We are currently hearing many speculations and analyses about the electricity agreement. On the Swisspower side, we will take a more formal position after having had time to analyze the roughly 1,800 pages detailing the modalities of the agreement.

At this stage, it is important to recall that the functions of electricity generation and network management must be clearly separated by the agreement. The expansion of distribution networks, necessary for an increasingly decentralized energy supply, is costly; it must be carried out intelligently and financed by the price of electricity.

With the ESIT project, Swisspower is currently testing dynamic network tariffs aimed at limiting costly needs for physical expansion. It is, however, evident that under the current market design, a decoupling of network costs is observed due to the desired increase in self-consumption.

If such a consolidation were to actually take place, a pure market logic could not simply apply. Distribution network operators are local monopolies, generally owned by the public sector.

Doesn't this market opening risk leading to an accelerated consolidation of the sector, particularly for small or medium-sized distribution network operators?

If such a consolidation were to actually take place, a pure market logic could not simply apply. Distribution network operators are local monopolies, generally owned by the public sector, and decisions will therefore be largely political. Attempting to predict the future, however, makes little sense at this stage.

What can be said is that, in my view, the current system indeed lacks efficiency. The energy transition is an immense challenge, which we are currently leaving to the responsibility of each small municipal service. The governance of the energy system as a whole should be rethought: this implies a stronger involvement of the Confederation. After all, the Gotthard tunnel would never have come into being if the town of Altdorf and the canton of Uri had had to undertake it alone.

So you consider it necessary that the Confederation more actively support the sector to maintain investments in the grid and more specifically in renewable energies?

Most energy supply companies belong to the public sector, whether municipal or cantonal authorities. Financial resources are often limited – notably because massive investments are already planned for the development of district heating networks, while, at the same time, revenues from gas networks are decreasing. A larger financial participation by the Confederation is therefore necessary. It cannot be content to continuously reshuffle the regulatory landscape while leaving the sector to face the concrete implementation alone.

Is the argument that this agreement would be necessary in the event of a new energy crisis in Europe — as in 2022 — really defensible? Because in the event of a major shortage, isn't the risk that each state will prioritize its own interests above all, regardless of any agreements in force?

Good relations with our neighbors in the European Union reduce the risk of an energy shortage — I am convinced of that. Solid agreements between Switzerland and the EU, particularly in the field of electricity, make it possible to formalize and strengthen these relations. I am convinced that an ambitious electricity agreement will contribute significantly to the security of our country's energy supply.

What would happen in the event of « no deal » for the future of the Swiss electricity grid?

Without this agreement, the security of supply in Switzerland would be subject to increasing pressure. An absence of a contractual framework with the European Union in the field of electricity does not constitute a favorable situation for our country. For now, I mainly look forward to discovering the precise content of this agreement.

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