Stricter capital adequacy requirements planned for large electricity companies
Published: Friday, Mar 8th 2024, 12:20
Updated At: Friday, Mar 8th 2024, 12:20
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The Federal Council wants to tighten the liquidity and capital requirements for eight systemically important electricity suppliers. This is the second step towards replacing the so-called rescue package. In future, the federal government will no longer have to step in in the event of bottlenecks.
The Federal Council submitted the draft amendment to the Electricity Supply Act for consultation on Friday. The new and expanded requirements for systemically important electricity companies are intended to limit the economic risks posed by these companies, as announced by the Federal Council.
The bill is intended to replace the Federal Act on Subsidiary Financial Aid to Rescue System-Critical Companies in the Electricity Industry, the so-called rescue package, which is due to expire at the end of 2026. As a first step, the Federal Council had already presented the Federal Act on Supervision and Transparency in the Wholesale Energy Markets.
It is intended to create more transparency in energy trading, improve supervision and strengthen system stability and security of supply. Parliament will decide on this next.
Cantons have a duty
With the second bill now presented, the Federal Council aims to minimize the liquidity and over-indebtedness risks of large electricity supply companies. The measures initiated by Parliament would currently affect eight companies - in addition to the three market leaders Axpo, Alpiq and BKW, Primeo Energie AG, Azienda Elettrica Ticinese (AET), Groupe E, Elektrizitätswerk der Stadt Zürich (EWZ) and Industrielle Werke Basel (IWB).
First and foremost, the companies or their owners - i.e. the cantons and municipalities - should be held accountable. According to the consultation draft, they must ensure that the companies have sufficient liquidity at all times and are in such a stable position that they can meet their payment obligations even in stress situations and that there is no over-indebtedness.
In future, the Federal Electricity Commission (Elcom) will review the liquidity models and capital adequacy information and can demand improvements. If companies do not meet these requirements adequately, the Federal Council will be able to intervene and set minimum requirements for liquidity and equity.
Further rules planned
According to the consultation draft, systemically important electricity companies must also have an appropriately equipped risk management system. In addition, the members of senior management, supervision and control should not belong to the management.
The companies concerned can be exempted from the scope of the new legal regulation if cantonal or communal measures exist that are equivalent to the federal regulation, as the Federal Council went on to say. The consultation period will last until June 14, 2024.
Further planned requirements at legislative level are intended to ensure that systemically important power plants can continue to operate without interruption even in the event of bankruptcy or debt restructuring proceedings. According to the Federal Council, work on this has not yet been completed and is therefore not included in this draft bill.
Uncertain situation in energy markets
The European energy markets have seen sharp price increases in recent years, which have been exacerbated by the war in Ukraine. This increased the liquidity requirements of electricity companies.
The fact that market participants will have to provide the federal supervisory authority with numerous details in future is unlikely to go down well everywhere. Former Energy Minister Simonetta Sommaruga had already said that she expected resistance. "No industry is happy when it has to create more transparency." However, the Federal Council is concerned with strengthening security of supply.
The aim of the two proposals is to ensure that the federal government no longer has to step in financially in future. At present, system-critical Swiss electricity companies can obtain loans to bridge liquidity bottlenecks. However, no company has made use of this since the rescue package came into force.
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