Agency calls for break-up of ESB

The ESB must be broken up as a matter of urgency to allow real competition to develop in the Irish energy market, the Competition Authority has warned the Government.

And Viridian, ESB's major competitor in the energy generation market, warns in its submission that "customers will not see the benefits" if the market remains dominated by one company.

In its submission on the Energy Green Paper "Towards a Sustainable Energy Future", the Competition Authority calls for the break-up of the former state monopoly. Government should split ESB generation into competing groups of electricity plants and take ownership of the electricity grid away from the company, the authority says.

"Successful reform of the market cannot occur without addressing the ESB's dominance of the electricity market," it says.

The authority warns that the Commission for Energy Regulation's (CER) recent announcement that ESB plans to dispose of 1,300 megawatts of its plant portfolio by 2010 "does not go far enough". Its submission endorses the finding of the Deloitte report commissioned by Government that more than 7 per cent of extra plant disposals are needed.

It also highlights the importance of including key price-setting plants in any disposal programme.

Ireland will remain an unattractive market for energy companies to invest in unless ownership of the electricity grid is taken away from ESB, the authority says.

Viridian echoes that view, stating that the lack of a competitive energy market "damages Ireland's international competitiveness".

The less drastic alternatives proposed in the Green Paper are "insufficient to trigger real reform", the authority's submission says. These include freeing up the ESB's land bank, increased interconnection and the advent of a single electricity market.

Such reforms would not address the fact that ESB controls the price of Ireland's electricity "99 per cent of the time", the authority says. They would not address the fact that ESB's dominance requires that Irish consumers have to pay for complex regulation "set to become even more complex unless ESB's dominance is addressed now".

A spokesman for ESB declined to comment on the company's submission to Government but reiterated the company's position that "a strong ESB is necessary for the economies of scale within the all-island market and the pending Ireland/UK market".

A strong ESB is also important for "the delivery of important infrastructure like the networks", he said.

A new OECD Economic Outlook report warns that boosting competition in Ireland's network industries, especially in the electricity and natural gas sectors, is becoming "a matter of urgency as these sectors contribute disproportionately to inflation".

The Competition Authority says Government must now tackle structural reform. "This decision cannot be delayed any longer as decisions not taken now may be imposed from elsewhere," it says.

Neelie Kroes, head of the EU competition commission, has signalled a willingness to impose market-opening initiatives on member states if they continue to drag their heels.