The process of auctioning electricity generated by the ESB to private suppliers will begin today, the Commission for Electricity Regulation has revealed.
The virtual independent power producers' auctions will allow independent suppliers to enter the market before their own generation plants are built. Suppliers become "virtual" power producers in this process and will sell electricity to large industrial users of power in the 31 per cent of the market opened to competition. Capacity will be offered in three separate auctions, with the first auction for 400 megawatts taking place today. Successful bidders will be informed of the amount of capacity awarded next Monday.
Supply contracts will run for 12 months from November 1st, 2000. The second auction, which will take place on October 13th, will offer a minimum of 100 megawatts, with successful bidders notified three days later and contracts operating from December 1st. Any capacity not taken up in the first auction will be included in the second one.
A third auction on October 20th will also offer a minimum of 100 megawatts, with winners notified on October 23rd and trading in the power will start on January 1st, 2001. Again, any capacity not taken up in the second auction will be included in the third auction.
Eight companies will be eligible to bid at today's auction. They are: Viridian Energy Supply Limited; EPower Limited; ESB Independent Energy Limited; Bord Gais Eireann (Assets); E.Co - The Electricity Company Limited; GV Power; Fingleton White & Co Limited; and Cogen Limited.
An auction of 40 gigawatt hours of "green" or renewable energy will also take place today. Bidders can apply for up to 40 per cent of capacity offered. The 40 per cent rule applies to each of the three auctions, provided a successful bidder is not allocated more than 240 megawatts in total across the three auctions.
Offering the capacity in three auctions represents a departure from the regulator's original plan to sell some 600 megawatts of power in one auction. The Commission concluded a more flexible approach should be taken, allowing parties to enter the market at different dates.
"By having three separate auctions, it will allow suppliers to build up a customer base and allow them to line up customers as they go along," said Mr Kieran McNamara, IT manager in the regulator's office with responsibility for the auctions.
The regulator decided to hold three auctions after taking account of responses received from interested parties at a workshop held last Friday to discuss the administration of the auction and the operation of the independent producers' arrangements. Addressing the Oireachtas Joint Committee on Public Enterprise and Transport yesterday, ESB chief executive Mr Ken O'Hara said the ESB welcomed the liberalisation of the electricity market and the entry of competitors.
"We believe that, in the long run, it will be good for ESB, the industry and for customers," he said. "We are playing our part in facilitating the development of competition in Ireland and we will continue to do so."
However, Mr O'Hara said the challenge of moving a company like the ESB from public service organisation to a competitive player was significant. "The ESB was a public policy company and its operation reflected the imperatives of the State, on a national basis, over the years," said Mr O'Hara. "The impact of decisions and policies of the past don't disappear overnight simply because there is a shift to market liberalisation. The management of the transition is, therefore, critical if stability in the industry is to be maintained and damage to the value of a major State asset is to be minimised."
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