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February 2018
LAW Newsletter

Legal Topic

Revision of the Electricity Supply Act (StromVG)

By Marc Grüninger and Patrick Locher
GHR Rechtsanwälte AG
Zurich, Switzerland

Current Situation

Since power supply systems constitute a natural monopoly, unregulated conditions bring about market failure. Inter alia, power supply systems are regulated to prevent network operators from levying inflated prices. In Switzerland, this regulation is laid down in the Electricity Supply Act (StromVG), which became effective on 1 January 2008. The purpose of StromVG is to ensure secure electricity supply and a competitive electricity market. Moreover, StromVG’s aim is to guarantee a sustainable electricity supply in all parts of the country and to keep the Swiss power industry competitive. 

Shortly after StromVG became effective, the Federal Office of Energy (BFE) began to revise it and started work on its complete revision. After a temporary suspension, work on the complete revision was resumed again in 2014 with the aim of revising StromVG in two separate legislative packages. 

First Legislative Package

With the first legislative package, the legislator intends to eliminate the deficits of the original StromVG. The central idea is to optimise or better utilize potential competition. To achieve this, BFE conducted numerous studies which resulted in ten measures in seven areas being proposed within the framework of the first legislative pack-age. 

Ancillary Services

Swissgrid as the national network operating company is responsible for ancillary services including the provision of control energy. Currently, only power station capacities were available for this. Under the revision, all grid users will be permit-ted to offer ancillary services. 

Electricity from Renewable Energies

Flexibility indicates the capacity of acting upon impetus from the grid operator or another player to feed-in or draw-off electricity. Flexibilities are primarily offered by flexible power production, flexible demand and storage in pumped storage or batteries. Currently, there are no provisions regarding access to such flexibilities. Usually, grid operators access it via ripple control. The revised StromVG will regulate the grid opera-tors’ access to flexibilities for end users and producers. The plan is to introduce a regulation which will allow the flexibility owner to decide about access of the distribution grid operator or the other player (s). 

In terms of currently applicable StromVG, the grid operator can be obliged to primarily utilise electricity from renewable sources (mainly hydroelectricity) for the retrieval of control energy. This priority also applies to the distribution of capacities in the grid. The revision of the Act proposes cancelling this regulation without re-placing it. 

Metrology

In the area of metrology, the revision of StromVG proposes a partial liberalisation for major clients and major producers. The major clients and major producers affected by the liberalisation will have the right of choosing their metrology operator (responsible for installation, operation and maintenance) and their metrology service provider (responsible for capturing, pro-cessing and distributing data). 

Grid Usage Tariffs and Quality

Regulation of grid costs is based on the cost-plus principle which stipulates that a grid operator is permitted to offset his chargeable costs via the grid usage tariffs payable by end users. The Federal Electricity Commission (ElCom) examines the cost calculations and publishes information on prices and tariffs. The legislator wants to put new and further incentives in place by introducing sunshine-regulations. The revision proposes the survey and publication of individual performance indicators of supply quality, appropriate costs and tariffs as well as compliance. In August 2016, ElCom decided the definitive implementation of the sunshine regulation. Until the necessary legal basis for this comes into effect, only grid opera-tors are informed about their individual results. The public will be informed as before. 

Grid Costs

The Electricity Supply Ordinance directs that the grid usage tariff for end users on low voltage level and without power measurement must consist of at least 70% of a non-degressive energy price. The revision aims at implementing a lower standardised proportion of energy price of at least 50% for end users and internal consumers. Moreover, the first legislative package of the Electricity Sup-ply Act makes provision for an amendment of the cost rollup from a roll over stipulation of 30% production cost and 70% output to a new roll over stipulation of 10% production cost and 90% output. 

The term local network (Arealnetz) which is currently only partially standardised will also be standardised in its essential elements. 

Trade 
The cross-border supply of electrical energy generates costs to transmission grid operators for grid usage. These grid usage costs are compensated in line with the ITC-regulations. However, the currently applicable StromVG includes no regulations regarding ITC reduced proceeds. For this reason, the StromVG revision provides for an adequate legal basis to be created in terms of which the ITC reduced proceeds are no longer rolled over to Swiss end users but are rather individually charged to long-term contract parties (such as Axpo, Alpiq or BKW). 

Market liberalisation 
Currently, the energy tariffs end users pay for basic supply are calculated in terms of production costs. Through the complete liberalisation of the energy market all market players are to be granted access to the grid. Thus, the revision endeavours to introduce comparative pricing with a reference market price for energy tariffs payable by end users. 

In the area of ancillary services, on 17 March 2017, Swiss Parliament decided that preference would only be given for supply under long-term contracts concluded before 31 October 2002 and for border hydroelectric power plants. The preference of power supplies to end users in basic supply and supply from renewable energies was also cancelled. These regulations entered into force on 1 October 2017. Regarding the first legislative package, the time schedule for the consultation process is set for the second half of 2018. Thus, the first legislative package of the revised StromVG would probably not enter into force before 2020. 

Second Legislative Package

In a second legislative package, the BFE originally intended to revise the transition to an incentive-based regulation and various international aspects which were originally not classified as urgent. However, the necessity of a transition to an incentive regulation is currently strongly contested and largely rejected. At this point in time, a time schedule for the second legislative package cannot be foreseen. 

For more information on this topic, contact Marc Grüninger at marcgrueninger@ghr.ch and Patrick Locher at patricklocher@ghr.ch.

Disclaimer: The above article is provided for information only and is not to be considered legal advice by the law firm or Lawyers Associated Worldwide.