ESB says prices unlikely to fall

The chief executive of ESB, Mr Pádraig McManus, has said there is very little prospect of electricity prices falling in the foreseeable future despite deregulation in the Republic.

Speaking after addressing the Leinster Society of Chartered Accountants, Mr McManus said he saw little sign of moderation in prices. He pointed to rising fuel as the main problem.

"The issue of electricity prices will be dictated by the price of fuel. Fuel accounts for 30 per cent of the end-user price. At the moment, with what's happening in the Middle East, I don't think we are going to see any moderation in the price of oil," he said.

Mr McManus said he didn't foresee "any dramatic improvement" in prices.

He also strongly rejected the idea that breaking up ESB would result in lower prices.

"Breaking up the ESB will not reduce the price of electricity and I think that is a fundamental that most analysts looking at the sector will agree with.

"If you look at the electricity sector across Europe, the utilities have got bigger and bigger. Even though ESB is a big company by Irish standards, in the electricity sector it is a tiny company," he said.

He claimed the two big "variables" when considering the price of electricity were the cost of borrowing money and the cost of fuel. He said making ESB smaller would increase the cost of borrowing money and buying fuel.

Asked about deregulation - which takes place on February 19th - he said activity would be minimal initially.

"There is no doubt about it that the amount of competition will be slow to develop. New entrants will always look at industry and commercial sectors and only when they feel they have got the absolute maximum out of these sector will they look at the domestic sector.

"That is what has happened in every other country to date and I expect it will be the same here in Ireland," he said.

Mr McManus said the issue of ESB dominance needed to be tackled but he said one of the best ways to do this was by building an interconnector with Britain. He said this would allow other competitors into the market.

He said companies would only fund such a venture if they could see a reasonable return.