Tendering for review of ESB gets under way

Applications will be invited today from European and Irish consultancy firms to carry out a major Government review of the ESB and the energy sector.

The Minister for Communications, Marine and Natural Resources, Mr Noel Dempsey, announced his intention to carry out the review during a recent trade mission to China, but few people in the energy sector expected the process to start so quickly.

The Minister has said the future of the ESB will form a central part of the review and selling or privatising some ESB assets has not been ruled out.

He has voiced concern on several occasions about the ESB's ability to set prices for the whole industry.

However, the Minister has indicated the Government does not favour selling off the transmission or distributions arms of the company. The ESB group has been valued at over €4 billion by industry experts.

Apart from the ESB, the review is also expected to look at the renewable sector, Ireland's fuel mix and its dependence on imported sources of power.

In previous statements the Minister has speculated that any review is likely to take about six months and possibly longer. The ESB has indicated its willingness to participate in any review.

The most controversial issue in the review is likely to be the future of the ESB's 19 power stations. During recent union-management talks about restructuring the organisation, a proposal was floated to sell or lease several ESB stations, although this idea was strongly rejected by the company's unions.

But this idea of selling stations to competitors is likely to be closely studied in the review. While many of the ESB stations are old, there would be a strong appetite in the private sector for purchasing some of them.

The stations under the closest scrutiny will be those known as "mid-merit" plants - stations that are not strictly needed all the time to produce power.

The ESB's competitors - especially Viridian - will see the review as an opportunity to have the ESB's dominance reduced.

The ESB chief executive, Mr Pádraig McManus, has acknowledged the company's strong position in the Irish market, but he has warned against breaking up the company.

Speaking to reporters recently he claimed breaking the company up would simply deny the ESB vital economies of scale and ultimately increase the price of electricity.

He has also suggested the best way to increase competition would be to build a new east-west electricity interconnector with Britain.

The review by the Minister is not the only one the company is facing. The energy regulator Mr Tom Reeves is also carrying out a review of the ESB's costs and return on capital, which will dictate prices. This is expected to closely study the kind of profits the company's networks division reports each year.