Consumers could face an 8 per cent rise in their electricity bills from September following a request from the ESB for its second price increase this year.
The company is also seeking a further 4.5 per cent increase in electricity prices from January 2005 and has not ruled out further price rises next year.
The ESB submitted a formal price increase proposal to the Commission for Energy Regulation (CER) yesterday. Usually it submits its price increase requests to the CER on an annual basis and consumers' bills rise in January. But an ESB spokesman said the proposed price increase was necessary to cover rising fuel costs due to a sharp rise in the price of oil.
The CER, the State body that will rule on the proposed price increase, said it would consider the request. A decision will be made shortly on whether a September price increase is viable, it said.
Electricity charges account for 1.4 per cent of the consumer price index and Friends First economist, Mr Jim Power, warned last night that a decision to sanction the increase could add 1 per cent to the rate of inflation in a year.
"The direct effect of a 12.5 per cent increase in electricity prices would be a 0.2 per cent increase to annual inflation but this could be up to 1 per cent when this is factored into other industries," he said.
In January this year the ESB increased electricity prices by 5 per cent following approval from the CER. The previous year electricity prices rose by 10 per cent.
Despite the increases in electricity prices over the past 18 months, the ESB says that it will incur a shortfall of revenue worth €195.8 million if a new price increase is not sanctioned.
The firm's formal proposal to the CER also suggests the company would need to increase prices by 26.7 per cent to cover the impact of higher fuel costs.
ESB says it believes a price increase at this level is unsustainable and proposes to defer future price rises until it is clear whether fuel prices will reduce.
However, it also warns that sustainability of supply is undermined if its prices do not reflect the cost of providing electricity.
"While customers will understandably be very unhappy with a high price increase following the increases of recent years, security of supply is dependent on the viability of the existing generators combined with the entry of new capacity into the market and this is undermined if prices are not cost reflective," said the ESB price proposal.
The proposed 12.5 per cent price increase in electricity charges was criticised last night by a range of organisations representing business and farmers.
A spokesman for the Minister for Communications said Mr Ahern had no decision-making role over prices, which was a matter for the regulator.
But he said it should be stressed that electricity prices had a knock-on effect on the rest for the economy.