Bord Gais expects to be a big power in the electricity market

ANALYSIS:Bord Gáis is to spend €2 billion rebuilding itself into a modern 'dual-fuel' utility

BORD GAIS chief executive John Mullins intends taking the company to the point where it will be as big a player in the electricity market as it is in gas supply.

Mullins predicts that by 2014 its business will be split 50/50 between the two. This will be a marked shift for the company the State established 32 years ago to exploit the Republic's own natural gas resources and to supply the fuel to homes and industries.

Bord Gáis is spending €2 billion on rebuilding itself along the lines of modern European "dual-fuel" utilities which sell both electricity and gas to their customers.

The move means it will be competing with its sister State company, the ESB, in the electricity market. Not only that, Bord Gáis intends selling to households as it already has much of the infrastructure it needs to do this. This will mean competition in this market for the first time.

Ultimately, it will be one of four State-owned players in the electricity market. The ESB is already there, while Bord na Móna and Coillte also have plans to become electricity producers and suppliers in some shape or form.

Bord Gáis is far closer than those two companies. It is building a modern gas-fired electricity generation plant at Whitegate in Cork Harbour. This will have the capacity to produce 445 megawatts of electricity, which means it represents an investment of more than €400 million for the company. It is also going the renewable route, and intends building wind farms and spending money on researching wave power.

It could be argued that there is a contradiction in this.

The State owns Bord Gáis. For the guts of a decade, government policy has focused on ending the dominance of another State company, the ESB, to encourage competitors to enter the market.

As the ESB has been left with the business that none of the independent players want, this policy has succeeded, or at least gone as far as it can possibly go until someone else decides they want to supply power to the Republic's 1.7 million homes.

The independent operators are all keen to see the ESB's influence wane, and want the Government to press ahead with splitting its power-generating and transmission businesses.

But they're sanguine about Bord Gáis's plans to begin producing power. One industry figure says any competition at all in the market is welcome.

Paul Dowling, chief executive of Airtricity, which will be competing with Bord Gáis in the power-supply market, says the company does not regard it as a problem. "It's really an issue for the State if it wants to have two of its companies competing in the same market."

Bord Gáis will have to get approval from the Commission for Energy Regulation before it can enter the electricity market. The agency's spokesman says that from its point of view Bord Gáis would be competing with the ESB.

"They would be able to offer innovative dual-fuel options to customers whereby they could supply both electricity and gas to existing customers."

A spokeswoman for Minister for Energy Eamon Ryan says the department regards the plans as a "useful step that will increase competitiveness".

This is really the rub. Increasing competition in the market is the priority, and investors have been slow in materialising. However, that is also changing. At this stage 13 potential investors have approached national grid operator, Eirgrid, and expressed interest in building 17 power plants, as opposed to wind farms.

It looks like Bord Gáis will be taking on more than the ESB when it begins producing power.