"The liberalization of the market will call into question the very notion of the DSO"

In Bern, the debate is becoming electric. For several weeks now, notably since the presentation of the clauses of the electricity agreement envisaged between Switzerland and the European Union, criticism has been pouring in against a text that is manifestly more controversial than expected.

At the heart of the current discord: market liberalization. “As soon as the electricity agreement enters into force, 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,” indicates the Federal Department of the Environment, Transport, Energy and Communications (DETEC) in a press release.

Among the most virulent political voices against this agreement is Pierre-Yves Maillard. “Actors in 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. By contrast, Aline Trede, head of the Green parliamentary group (BE), considers this agreement with the EU indispensable for the energy transition.

As political parties begin to bicker over the issue, it is an ideal opportunity to probe the sector through a series of interviews conducted with key stakeholders. We begin this series with Cristina Pastoriza, the new director of the Multidis association, which brings together around twenty multi-utility distributors.

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

We remain convinced that a good integration of Switzerland into the European electricity market is essential to guarantee the stability of our grid, access to European market platforms and our import capacities.

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

That is a very pertinent question. Based on the information available at this stage, liberalization would be accompanied by the maintenance of a basic supply model for customers consuming less than 50,000 kWh per year. However, this model will probably be heavily regulated: basic supply providers are therefore likely to face a real catch-22 — offering an attractive enough product in the face of competition from the free market, while meeting numerous costly requirements in terms of tariff and contractual conditions. And all of this would have to be done with only modest financial returns…

Already today, with the provisions of the new Electricity Act (“Mantelerlass”), the profit made on basic supply has been cut by at least half, amounting to less than 1% of turnover in many cases. This profit could even turn into a net loss if the position defended by ElCom — which refuses to authorize the inclusion in tariffs of costs related to necessary resales to balance supply and demand — were to be maintained.

This is a topic that is talked about very little, but that represents an existential threat to distribution system operators. The law forces DSOs to procure supply far in advance for customers on regulated tariffs, without then allowing them to adjust their procurement according to actual demand — it’s absurd. If one adds to this the obligation for DSOs to take back solar energy injected into their grid at a minimum price potentially well above market prices, you get a perfect toxic cocktail.

We remain convinced that a large number of Swiss consumers — even in a liberalized market — will continue to favour electricity of renewable and domestic origin.

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

Given that renewable electricity production in Switzerland is currently supported via the basic supply model, it is indeed legitimate to wonder how this support will be ensured within a fully open market. The details of the agreement with the EU have not yet been published, but the Federal Council has already indicated that the priority given to domestic production in the standard electricity product, planned from 2028, would have to be removed in the event of an agreement.

We are nevertheless less pessimistic than Pierre-Yves Maillard: we remain convinced that a large number of Swiss consumers — even in a liberalized market — will continue to favour electricity of renewable and domestic origin. Furthermore, electricity demand should increase with the growing electrification of society.

The question remains whether producers will continue to invest in the long term, as they will presumably be remunerated at market prices rather than based on their production costs. If so, other support mechanisms will need to be considered to guarantee a return on investment.

Finally, we do share the doubt expressed by Pierre-Yves Maillard regarding the real benefits that a complete market opening would bring to retail customers. It seems clear to us that the main interest of this agreement with the European Union does not lie in market liberalization, but rather in Switzerland’s integration into the European electricity market — integration that should ultimately also benefit end consumers.

Would this market opening not risk leading to an accelerated consolidation of the sector, notably for small or medium-sized DSOs?

As already mentioned, DSOs are currently under growing financial pressure. They also have to deal with an avalanche of new regulations, sometimes poorly thought out and difficult to absorb — even for large players. These factors, combined with low or even non-existent profitability in energy supply operations, are indeed likely to encourage some DSOs to rethink their business model, or even to refocus exclusively on their role as distribution network operators.

The agreement with the EU, and the liberalization it implies, call into question the very notion of “DSO” as it is currently understood in Switzerland. Indeed, the energy supply activity — including basic supply — will in future fall under the supplier, and no longer under the network operator. This means that our entire legislative framework, including the new Electricity Act passed in 2024, as well as its recently published ordinances, will quickly become obsolete.

The argument that this agreement would be necessary in the event of a new energy crisis in Europe — as in 2022 — is it really defensible? Because in the case of a major shortage, isn’t the risk that each state will prioritise its own interests above all, regardless of existing agreements?

In the case of a major crisis, it is indeed possible that the principle of “national” interest will prevail. That said, the main objective of this agreement is not to serve as a response to an extreme crisis situation, but rather to guarantee the stability of the Swiss electricity grid, to ensure our access to European market platforms, and to avoid any restriction on our import capacities.

What would happen in the event of a “no deal” for the future of the Swiss electricity grid?

Switzerland, being geographically located at the heart of Europe, has significant flows of electricity transiting each year through its grid — volumes that far exceed its own consumption. In this context, it seems hardly conceivable that no “technical” agreement will be found in the end. The real question will be the cost of such an agreement for Switzerland.

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