National Grid plans may lack safeguards

Plans to separate elements of the National Grid from the ESB contain critical omissions and major weaknesses, the electricity regulator warned yesterday.

Mr Tom Reeves said the current proposals may not safeguard the independent operation and control of the power transmission system, which is crucial to the fair operation of the newly-deregulated market.

In a paper to the Department of Public Enterprise, Mr Reeves said a draft Statutory Instrument establishing a new company to operate the National Grid does not fully implement the EU directive underpinning the power market's deregulation.

It is understood managers in that company, EirGrid, also have significant difficulty with the draft.

They will be accountable to Mr Reeves under the directive for the fair operation of the National Grid, but state they have no control over its maintenance and development.

The natural consequence of that argument is they should not be accountable.

EirGrid will operate the electricity transmission network in the plan, but the ESB will own it and retain responsibility for its development and maintenance.

Mr Reeves said it would be of "significant risk" to EirGrid not to have complete control over maintenance and development.

Such concerns and EirGrid's are similar to those of the Competition Authority, which said in its paper that the full vertical separation of ownership of the ESB's generating and transmission activities should be considered.

In the current plan, EirGrid will decide when individual power stations should feed electricity into the network, ensuring the ESB cannot favour its own generation plant over competitors.

But the State-owned company will still decide which and when elements of the network will be maintained - and repaired in the case of breakdown.

Such questions are important because the ESB could be faced with a decision between repairing links to its own generation plant and that of competitors.

This was among the "high-level issues" cited by Mr Reeves, who said there was a risk or perception that the ESB could unduly favour its own generation plant, and schedule the output of power to favour itself.

The ESB could also, he said, allocate costs from a competitive business such as generation to the naturally monopolistic activity of transmission ownership.

The company could deter new market entrants for its own benefit, he said.

On this, the Competition Authority said the ESB could "naturally favour" itself.

Mr Reeves said elements of the plan which applied the directive lacked consistency with those that did not.

The draft did not provide for regulatory accounts of the separate businesses of the ESB or EirGrid, he added. This was viewed as a critical omission.