The ESB has been given approval to increase its electricity prices by an average of 9 per cent from next month.
The decision was published by the Commission for Energy Regulation this afternoon.
CER said the increase is due exclusively to the escalation in fossil fuel prices and the forward fuel prices on world markets in recent months.
"The majority of ESB power plant is fuelled by oil, coal and gas. Over the past year the price of oil has reached record levels, with Brent crude at the end of August 59 per cent higher than the same time last year. Gas prices have increased by 49 per cent and coal by 77 per cent," a statement said.
"Even since ESB's original submission in July, gas and coal have continued to increase. Current projections indicate that fuel costs will remain high and volatile but there is no certainty on this."
The CER said that in the event of a sustained fall in world fuel prices it will ensure that ESB tariffs are adjusted downwards and that customers receive the resulting benefits.
"While the average increase in ESB's price is 9 per cent, many low-usage customers will experience below average increases of the order of 7 per cent.
However, it added: "Customers who consume large volumes of electricity could see bill increases above the average reflecting the fact that the increase relates exclusively to fuel costs. For the average domestic customer the new tariffs will represent an increase of about €1 per week."
The regulator will publish a draft decision next week proposing a further 3.5 per cent increase next January. This proposed increase is required to address other increased costs, mainly environmental, networks and public service obligation levies, the CER said.
It will make its final decision on this at the end of the month.
Labour's spokesman on natural resources, Mr Tommy Broughan, said the increase was the latest "stealth tax" on consumers and businesses.
"The Commission for Energy Regulation (CER) has approved a 9 per cent rise in ESB prices and is set to confirm an 11 per cent increase in domestic gas prices and a 16 per cent hike for commercial customers later this month.
"These increases represent a high cost for domestic and commercial users who are already bearing the brunt of a series of utility bill increases."
Mr Broughan said the 9 per cent rise comes on tope of a 9 per cent rise in 2002, a 13 per cent rise last year and a further 5 per cent rise in 2004. He claimed Irish industry already pays 25 per cent more than the EU average for electricity supply and that consumers are experiencing year-on-year increases far beyond the rate of inflation.
He appealed to the CER not to sanction any further increase in the price of gas following the ESB rise.
"Many businesses, large and small, as well as domestic consumers have been pummelled by huge price hikes in the last two years and cannot afford any more."
The Green Party's energy spokesman Mr Eamon Ryan also criticised the decision.
"This price increase is a direct result of bad policy decisions by the Government over the last five years. They have only partly de-regulated the market but have left the ESB in a dominant position where they still set electricity prices," he said.
"This would be less of a problem if the company's plants were highly efficient, but unfortunately they are only now running at some 76 per cent of their capacity.
"The taxpayer is now having to pay for the mess the Government has made of the development of our renewable energy resources. Rather than handing money over to the international oil and gas markets we should be developing our own indigenous energy resources such as wind, wave and solar power where the fuel cost is zero."
Fine Gael's spokesman on energy, Mr Simon Coveney, said the price rise was "indefensible" as electricity prices were already too high.
"Rip Off Ireland is alive and well and, thanks to Government policy, householders and businesses are the victims," he said. "It seems no matter what the impact on consumers, and no matter how negatively such price rises harm the business sector, the green light is inevitably given."
The Chambers of Commerce of Ireland (CCI) called on the energy regulator to explain why he had not acted upon his own office's research and applied a lower price increase to commercial and industrial general purpose users.
Chief executive Mr John Dunne said: "A recent consultation paper on the pricing of electricity by the Commission for Energy Regulation (CER) suggests that business is currently being overcharged for electricity by up to 10pc relative to other sectors," he said.
"And while we welcome the planned move to a marginal pricing mechanism which will rectify this inconsistency, this will not come into effect for at least 18 months. Why should business have to wait that long for relief? We believe that instead of the proposed 9 per cent increase across the board this represented an opportunity to begin to put this inequity to rights."
Mr Dunne said the Government was currently well ahead of its target income from fuel excise duties and that there would be nothing at risk in terms of "budgetary arithmetic" if the tax paid by the ESB was waived for the next six months.
In a statement following the decision, ESB said if fully recognises that any rise in energy costs has an impact on both domestic and business customers.
"However in light of the major changes in fuel charges a rise in electricity tariffs is unavoidable and therefore welcome today's determination on electricity tariffs by the CER.
"The delay in reflecting fuel price increases in tariffs over the past two years has shielded customers from the imposition of the full impact of the fuel cost hikes in 2003 and 2004. ESB has been carrying this increase in fuel prices since the start of 2003 and has accumulated a cost shortfall of €196m.
"ESB believes that the tariff change made by the CER is the optimum approach to balancing the concerns of customers and the requirements of the industry."