Authority clashes with regulator on ESB's role

The Competition Authority has differed sharply with energy regulator Mr Tom Reeves over what should be done about ESB dominance in the electricity market.

The authority has responded to Mr Reeves's recent statement that there are too many obstacles to breaking up the ESB at present, saying that its view was that these difficulties should not be insurmountable.

In a paper circulated earlier this month Mr Reeves said: "The CER (Commission for Energy Regulation) does not have the authority to order such structural changes".

Mr Reeves, while not ruling out major structural changes at ESB in the long term, said the best approach right now was a "regulatory" one that would achieve all the necessary market benefits. He asked for views on these conclusions from the industry and other interested parties.

Responding in its submission the Competition Authority says while legislation would be needed to break up ESB, "this should not however be regarded as an insurmountable obstacle".

The authority, led by chairman Dr John Fingleton, has long been an advocate of breaking ESB into three units - generation, transmission and supply.

The Commission for Energy Regulation (CER), which is led by Mr Reeves, recently stated that breaking up ESB would take a long time and would not be completed in time for full market opening next year.

The authority document plays down this difficulty. "In the authority's view, this is not a valid reason for not pursuing or recommending such an option".

The CER also stated that because of the size of ESB any break-up plan would still leave the company with a looming presence in the market. The authority comments on this: "While this may be true, such mitigated market power would be much less of a concern than the extensive market power the ESB currently has."

The authority says it supports breaking ESB up into its component parts: generation, transmission and distribution and supply. It also says there may be benefits to splitting up ESB's power stations into standalone units or getting ESB to "divest" itself from certain plants altogether.

It says these issues are as important as the proposed east/west electricity interconnector with Britain. It also points to the ESRI's recommendation that the management of ESB plants could be put out to tender at some time in the future.

The Competition Authority says it would be "inappropriate" for ESB to hold sway in the direction of public policy in the electricity area. "While the ESB's contribution to the appropriate way that it should be regulated is undoubtedly valuable and indeed necessary, it is nevertheless the authority's view that the CER should be leading the way forward with its own independent set of proposals."

It calls for an investigation, if necessary by external consultants, into the costs and benefits associated with structural reform of the company.