Why Electricity Costs Remain a Key Management Risk for SMEs

The heat does not just take its toll on people and supply chains. It also shows up in companies’ financial reports: air-conditioning in offices, ventilation in workshops, refrigeration units, machinery operating at higher capacity, and adjusted working hours. When demand rises, the electricity bill can become a margin issue, particularly for SMEs operating energy-intensive facilities or on contracts exposed to market prices.

The paradox for Swiss businesses is that this warning sign comes at a time when several suppliers are announcing tariff reductions for 2026. Good news? Yes, but it should be treated with caution. The final cost depends on the consumption profile, the company’s status in the electricity market, the local supplier, network charges, taxes and, from now on, new billing arrangements for metered consumption. For a business leader, the challenge is therefore not just to look at the price per kilowatt-hour: it is to understand what makes the bill vulnerable to heatwaves and regulatory changes.

When heatwaves turn electricity into a strategic cost centre

In an SME, electricity is often treated as a stable operating cost: it arrives every month or every quarter, is recorded, and then disappears into overheads. Heatwaves are changing this perception. They concentrate consumption on uses that are difficult to reduce immediately: cooling premises, maintaining an acceptable temperature for staff, preserving sensitive goods, running production equipment or ensuring IT continuity.

The problem is not just the volume consumed. A business may also be affected by the structure of its contract. Some SMEs are on a basic supply scheme, with regulated tariffs. Others, because their annual consumption exceeds 100,000 kWh, are free to choose their supplier. This threshold is central to the Swiss system: above it, the business has access to the open market; below it, it remains, in principle, supplied by the local provider at the regulated tariff. This distinction influences how price fluctuations are passed on. A market-based contract can offer opportunities, but it can also pass on price volatility more directly, depending on the terms negotiated.

For a business, the question is therefore not simply: ‘How much does electricity cost this year?’ It becomes: ‘When do we consume it, for what purposes, with what flexibility and under what contract?’ A food shop, a joinery, a laundry, a doctor’s surgery or an industrial SME do not experience a heatwave in the same way. Their equipment, operating hours and ability to shift certain consumption patterns vary greatly.

A three-part bill – and none of it should be overlooked

The price of electricity in Switzerland is not limited to the energy itself. According to Swissgrid, it comprises three main elements: the cost of energy, grid usage charges and taxes. This structure explains why an announced reduction in the price of energy does not always automatically translate into an identical reduction in the total bill.

Put simply, the cost of energy corresponds to the generation or purchase of electricity. This is the most intuitive part for a business: the one we instinctively associate with the market. Network charges, for their part, fund the transmission and distribution of electricity. In particular, they cover the construction, operation and maintenance of infrastructure. As for taxes, these depend on the applicable regulatory framework and are added to the other components.

This layered approach is useful for managing a budget. An SME comparing its bills should avoid focusing solely on the total amount payable. It is often more informative to break down the items, identify what is increasing, what is decreasing, and what is driven by local or regulatory decisions. It also forms the basis for discussions with a supplier, challenging a quote or preparing a provisional budget.

The Federal Electricity Commission (ElCom) monitors and regulates the tariffs applied by suppliers. The legal framework is based, in particular, on the Electricity Supply Act and its associated ordinance. For businesses, this framework is not merely an administrative formality: it defines who can choose their supplier, how tariffs are regulated, and under what conditions network costs are passed on.

The reductions announced for 2026 will not eliminate volatility

There are several signs pointing to a reduction in 2026. BKW has announced a reduction in its tariffs of around 3.15 per cent for the basic supply, representing an annual saving of around 40 francs for a typical household. Groupe E, for its part, is talking of an average reduction of 1.6 per cent, amounting to 74 francs a year for a household consuming 4,500 kWh. These examples relate to household profiles and should not be applied directly to SMEs, but they do indicate some easing of pressure among certain suppliers.

The Association of Swiss Electricity Companies has also indicated, based on a survey, that electricity prices are expected to continue falling in 2026, mainly due to falling prices on the electricity market. For businesses, this situation may provide some breathing space in their budgets. However, it does not eliminate regional differences or the risks associated with consumption patterns.

SMEs must remain alert to another change: since 1 January 2026, a new billing method relating to consumption measurement – that is, metering – has been imposed by the Swiss Confederation, according to information from Geneva Industrial Services. This metering charge may offset some of the reduction seen in other components. In other words, the ‘energy’ line item may show a favourable trend, whilst the total bill may fall less than expected.

Furthermore, according to the cited document, on 1 April 2026 the Federal Council approved a reform of the Electricity Supply Act aimed at introducing more stable tariffs for end customers of the basic supply, with new accounting rules for suppliers. For SMEs, stability is invaluable: it simplifies budgeting, commercial quotations and cost price calculations. However, the practical implications must be assessed on a case-by-case basis, depending on the canton, the supplier and the company’s status.

Open market or regulated tariff: two different approaches for business leaders

An SME with an annual consumption exceeding 100,000 kWh can choose its supplier. This freedom requires active management. It involves being aware of contractual deadlines, indexation clauses, renewal terms, the fixed and variable components, and how price spikes can affect the bill. Against a backdrop of increasingly high temperatures, the issue of flexibility becomes a practical one: can we smooth out certain consumption patterns, reschedule processes, programme equipment or avoid concentrating heavy usage during the most strained periods?

For businesses relying on basic supply contracts, the scope for negotiation is more limited, but not non-existent at an operational level. The main lever, therefore, is understanding consumption patterns and energy efficiency. Regular meter readings, comparing consumption across different periods, identifying the most energy-intensive appliances, or checking ventilation and cooling settings can reveal potential savings without requiring a complete overhaul of the business. The aim is not to compromise comfort or safety, but to avoid ‘hidden’ energy consumption.

In both cases, accounting has a role to play. All too often, electricity is tracked solely as an external expense. However, for an SME operating on tight margins, it can be useful to link energy expenditure to business activity: turnover, production volume, floor space, opening hours or days of extreme heat. Even without setting up a complex system, a simple tracking spreadsheet can help identify deviations and provide a basis for decision-making.

Energy efficiency investments must also be assessed methodically. Replacing equipment, improving control systems, installing a management system or reviewing a process may be appropriate, but the calculation must take into account the full cost, the useful life, the impact on operations and tariff uncertainties. A trust company or specialist adviser can help translate these choices into a budget, a cash flow plan and a cost-benefit analysis, without promising uniform savings for all businesses.

Budgets for 2026: anticipate a fall, but maintain a safety margin

When it comes to budgets, the temptation might be to take the announced price cuts at face value and automatically reduce the energy budget. That would be too hasty. Announcements from BKW and Groupe E, or guidance from the AES, indicate a trend, but each business must check its own tariff, supplier, local authority, customer status and consumption profile. Tariffs may vary regionally, and the total bill depends on several factors.

A prudent approach is to prepare several scenarios: a base-case scenario based on the tariffs provided by the supplier, a more favourable scenario if the price drop is fully confirmed, and a stress scenario in the event of high consumption during a heatwave or more intensive activity than anticipated. This method is particularly useful for businesses that offer fixed-price deals, operate on tight margins or have multi-year customer contracts.

Ultimately, the heatwave serves as a reminder of a fundamental management principle: energy is no longer a passive cost item. Even when rates fall, the electricity bill remains subject to usage patterns, infrastructure, regulation and contractual terms. For Swiss SMEs, the right approach is neither alarmism nor a wait-and-see attitude, but a careful analysis of the bill, regular discussions with the supplier and the integration of electricity costs into the company’s financial management.