The partial liberalisation of the electricity market, which begins on February 19th, will not lead to cheaper power prices for domestic users in the short to medium term.
But major industrial users of power can look forward to cheaper electricity next month, after the Commissioner for Electricity, Mr Tom Reeves, creates a "virtual market" by selling off the rights to supply about 400 megawatts of power. This represents about half of the 800 MW of production which will be opened to competition when 28 per cent of the market is liberalised.
On the basis of their high consumption of power, as many as 320 large firms will be "eligible" to benefit when the full 28 per cent share is freed up. Fewer, however, will benefit in the first instance after Mr Reeves sells 400 MW of capacity to suppliers in 5-MW tranches.
Of itself, the supply of electricity generated by the ESB may not prove to be a hugely profitable business. But some of the consortiums - 10 or so to date - who have said they plan to build electricity generation plants at various locations in Dublin, Kildare, Cork and Meath, are sure to see this as an opportunity to secure business before their own plants are complete.
A key issue will be the modalities of the business arrangements between the suppliers and the ESB, the generator, which are currently being worked out. Prospective suppliers have claimed that the ESB has been slow to enter into commercial negotiations on the wholesale price for electricity.
Another crucial issue for these suppliers will the question of the management of the Transmission System Operator (TSO), who controls the national grid. Suppliers have argued that in a situation where the ESB would be competing against other suppliers, it would be wrong for it to retain control of the national grid.
Mr Michael McKernan, head of Huntstown Power, the consortium owned by the building materials firm CRH and Northern Ireland electricity firm Viridian, said this would be intrinsically unfair. Speaking after his consortium secured planning permission for a 600 megawatt gas-fired plant at Huntstown, north Co Dublin, this week, Mr McKernan said: "What we're saying is that we'll accept an ad-hoc TSO, providing there's a commitment to create a permanent, independent TSO. We want it to be independent in its day-to-day functions."
The Minister for Public Enterprise, Ms O'Rourke, is understood to have taken legal advice on this question and she is thought likely to seek Cabinet approval on Tuesday week for the formal separation of the TSO's role from the ESB.
A further matter of concern for the independent power generators is a plan by the ESB to spend some £200 million (€254 million) building a 400 MW gas-fired plant at Ringsend in south Dublin with the oil firm Statoil. Known as Dublin Bay Power, this consortium acquired land for the development from the ESB.
Ms O'Rourke has stated that the go-ahead for the development was conditional on the ESB selling its stake in the development on competition grounds, if required. Described as a "carrot and stick" approach by the Minister, this followed complaints from independent power producers that the State-owned firm had withheld information on the transmission system and connection charges. The producers also claimed the Ringsend development was an anti-competitive extension of a dominant position.
For its part, the ESB is understood to be arguing that preventing it from constructing the Ringsend plant would itself be anti-competitive, as it must prepare to compete against new market entrants.
This argument did not assuage E-Power, a consortium owned by Esat founder Mr Denis O'Brien and the US power firm GPU, which lodged a complaint to the Competition Authority on the basis of its claims that the ESB was abusing its dominant market position.
A crucial issue for the ESB is that while many of its generation plants are ageing and perceived to be inefficient, these will compete with firms using technologically-advanced generation methods.
Of these, the most efficient are gas-fired generation stations. Such plant is planned by at least five consortiums: ESB and Statoil; Huntstown; Bord na Mona and the French multinational Elf Aquitaine; Bord Gais and Canadian Utilities; and Ireland Power, a consortium formerly involving Scottish Power, now replaced by British Petroleum (BP).
The difficulty facing each of these plans is that Bord Gais will be unable to supply gas to all developments. Deciding how to share out the available gas will be the job of Mr Reeves and his team.
Given the shortage of gas, all the proposed developments will not go ahead. Accordingly, prospective market entrants are likely to be extremely keen to gain a foothold in the market by buying up tranches of electricity for wholesale supply.
