ESB gets permission for €300m plant at Aghada

A new €300 million ESB power plant at Aghada, Co Cork, has been approved by Minister for Communications Noel Dempsey but the company will have to sell the output to its rivals. Emmet Oliverreports.

A letter has been sent by Mr Dempsey to the ESB informing the company that the 430 megawatt plant can go ahead but in a controversial move the Minister has stipulated that the ESB will have to give the output to an independent supplier, possibly following an auction process.

Among the companies which could take up the output are Viridian, Bord Gáis, Airtricity, Tynagh Energy or Aughinish Alumina. It is also possible a new entrant will come into the market. The ESB will be relieved to get the ministerial go-ahead but there will be anger among ESB unions at the idea that power is to be sold by another company.

The Minister, however, in an announcement to be made today is expected to emphasise that the plant must go ahead because of security of supply concerns and that to allow the ESB to sell the power would simply confirm its price setting power and undermine competition.

The Aghada plant will be the first station built by the ESB for many years. The company has been concentrating in recent years on overseas expansion, but it is keen to be rid of some of its older plants and to replace them with modern state-of-the-art facilities.

The new plant is likely to be have a much smaller staff than normal because of the modern technologies used and should also produce cheaper power as a result.

Mr Dempsey, since publishing an energy Green Paper a few months ago, has been trying to ensure security of supply concerns are addressed but also that the ESB is not allowed to increase its price setting powers. At present ESB tariffs tend to influence the whole market, even governing the prices set by independent generators.

Last night Viridian, the main private sector company, said the crucial issue was who controlled the plant. "It is disappointing that the opportunity has been missed to run an open and transparent competition for the replacement of the Aghada power plant. Allowing ESB to build and control a large capacity baseload plant while only marginal sites are being made available to independent operators sends a very negative signal to potential new investors."

ESB unions, meanwhile, had an altogether different reaction when contacted last night. Brendan Ogle, regional organiser with ATGWU, said the deal was contrary to a range of collective agreements in the ESB and would undermine the company as a vertically integrated utility.

He said he was "disgusted" at the Department of Communication agreeing to spend public money, effectively "subsidising" the ESB's rivals. A meeting next Monday has been scheduled between ESB management and union representatives. The ESB board is likely to discuss the issue towards the end of the month.

The head of the Commission for Energy Regulation, Tom Reeves, recently approved the Aghada plant himself, but did not impose the kind of conditions Mr Dempsey is seeking. Both Mr Reeves and Mr Dempsey have to approve the plant. The plant could be open as early as 2009, mainly because the ESB already has planning permission for the site.

Several bodies have drawn attention to Ireland's shortage of generation capacity in recent months, and also the rise in electricity prices.