A plea in favor of GRDs, these key players in the energy transition

Having led one of the major GRD (Distribution Network Operators) and energy suppliers in Switzerland for several years, and having worked alongside many other professionals in the sector during that period, I undoubtedly do not view this major economic player of the Swiss energy system in a completely objective light.

Nevertheless, I believe that the public image of these companies, as well as the treatment they receive from the legislator and the regulator, do not do justice to their role as engaged actors in the national energy strategy, nor to their function as local providers of jobs in the trades of the energy transition. From my point of view, this profession, by nature diverse and poorly organized, is virtually inaudible in the public debate and allows itself to be too easily mistreated by all of its stakeholders.

The deterioration of the GRDs' image goes back to the energy crisis, when kWh prices reached heights never seen before. Heroes of everyday life during the pandemic — alongside nurses, supermarket cashiers and train drivers — the GRDs then became scapegoats, accused by customers of raising tariffs. Simple relays of a crisis they in no way caused and subject to opaque and complex tariff regulation, they are now perceived as profiteers by their citizen-customers.

The real beneficiaries of the crisis were not the GRDs, but the owners of electricity production facilities operating at almost fixed costs.

Indeed, the real beneficiaries of the crisis were not the GRDs, but the owners of electricity production facilities operating at almost fixed costs: the large producers of hydraulic and nuclear-origin electricity. I refer the reader here to the publications of the results of the three main Swiss producers over the past three years.

It should, however, be recalled how much these same producers had previously suffered, to general indifference, from prices that were persistently too low to cover the costs of their domestic production. Nevertheless, during these years of energy crisis, while the GRDs saw their popularity collapse among their customers, no political or administrative authority (DETEC, OFEN, ElCom) had a word to support them against media criticism.

The administration, precisely, as well as the legislator who ratifies the texts it proposes, has, on the contrary, since the first Electricity Act of 2008, continuously undermined the financial base of the GRDs, thereby reducing their capacity to invest in the energy transition. Legal provisions almost always evolve to the detriment of the GRDs and are drafted so vaguely that they give ElCom (the Federal Electricity Commission, the sector's watchdog) full latitude to further restrict their room for manoeuvre through binding directives.

Above all, all of these texts and mechanisms reveal either a manifest ignorance of the GRDs' trades and constraints, or an unavowed desire to harm them, in order to push them, for example, to group together to simplify the Swiss electricity system and improve its efficiency. The situation has now deteriorated to such an extent that some activities called public service lead to structural financial losses for the GRDs.

In my understanding of economics, a public service activity carried out in a monopoly situation must be controlled by an independent authority and must allow for the generation of "reasonable" profits. But such an activity should never be carried out at a loss.

Although producers can freely sell their surplus, the GRDs are obliged to take it back, with a floor price set by the new law: at least 6 cts/kWh for small producers.

Let us take a few examples to illustrate my point, at the risk of becoming a little technical:

• From 2008 to 2025, the "average price" mechanism (6.5 LApEl), although born of a good intention — to protect captive customers — turned against its authors during the price rise. It also created competition distortions between GRDs, depending on the size of their portfolios and their own production. A law should not advantage some to the detriment of others, and ElCom's rigid interpretation aggravated the situation. Fortunately, the new Electricity Act will abolish this mechanism, and from 2026 the GRDs will again be able to separate the management of captive and free portfolios.
• ElCom's prohibition on including "market resales" in the GRDs' tariffs is an incongruity that the new law did not correct, due to lack of clarity. ElCom justifies this prohibition by the fight against speculation, but seems to ignore the reality of the GRD profession, especially in a market made unstable by the rise of decentralized solar. To build a portfolio over several years, as the law requires, the GRD inevitably generates surpluses that it must resell, notably because of the obligation to take back solar. Many GRDs practice "netting" between purchases and resales, logically passing the balance on to their tariffs, often without knowing that ElCom forbids it. According to ElCom, these gains (or losses) must remain the responsibility of the GRD, outside regulated tariffs. This problem worsened in 2024 with the surge in balancing energy costs, treated in the same way. 
• The most publicly debated point concerns the minimum buy-back price for solar electricity by the GRDs. Although producers can freely sell their surplus, the GRDs are obliged to take it back, with a floor price set by the new law: at least 6 cts/kWh for small producers. This mechanism disconnects the producer from the market, protecting them from negative prices caused by the self-cannibalization of solar. Under pressure from installers, owners and their lobbyists, this minimum price was raised between the first and the last version of the implementing ordinances. Yet no one points out that this is a subsidy, not financed by the State, but imposed on the GRDs. It should also be noted that such a minimum feed-in price would logically be rejected by European authorities the day Switzerland joins the European electricity market.
• Another anomaly: the GRDs will now have to ensure the public service of supplying captive customers without any real profit. Until now, ElCom arbitrarily set the authorized gross margin, progressively reduced from 95 CHF/year per customer in 2020 to 60 CHF in 2024, which serves in particular to cover management costs (call center, billing, collection). The new Electricity Act allows the GRDs to cover their costs, but does not provide for any profit, except a negligible WACC on working capital. In short, the GRDs are asked to work without profit, with no incentive to optimize their expenses.
• Finally, the Federal Council has revised the network WACC downward, limiting the GRDs' capacity to invest. Yet they must borrow on the markets, offering competitive returns, to modernize networks put under strain by the strong growth of decentralized solar.

The GRDs constitute an extremely fragmented branch of activity, composed of more than 600 actors, whose sizes and characteristics are so diverse that their interests are rarely common or aligned.

All of these legislative and regulatory devices profoundly alter the financial health of the GRDs, thereby reducing their capacity to invest in renewable energies and the energy transition. Why, one might ask, do the GRDs not oppose these measures more effectively?

Unfortunately for them, the GRDs constitute an extremely fragmented sector, made up of more than 600 actors, whose sizes and characteristics are so diverse that their interests are rarely common or aligned.

Moreover, the AES, supposed to represent them, also defends the large producers — the main contributors — whose interests often diverge from those of the GRDs. From this cacophony no unified defense emerges, and the GRDs find themselves today without a real voice vis-à-vis the legislative and regulatory authorities.

These reflections are strictly personal and in no way bind my former employer.

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