Government to make `statement of principles' on electricity

The Government is expected to make a "statement of principles" next week, which will ultimately lead to the separation of the ESB's grid-management functions from the State-owned company.

But intensive and complex negotiations between the ESB and the Department of Public Enterprise have failed to resolve the question of control of the company's supply network. ESB unions are also involved in the negotiations, as the establishment of an Independent Transmission System Operator will have implications for staff.

It is understood that the ESB has agreed in principle to the establishment of an Independent Transmission System Operator, the function which controls when power stations on the national grid are used to supply electricity. This is carried out according to the demand for power on the grid, with the most economic power stations being "switched on" first.

Consortiums planning to build power supply plants have argued strongly that this function should be separated from the ESB when the electricity supply market is liberalised next Saturday. Otherwise, they say, the ESB would be in the unfair position of controlling both power stations and the demand for power on the national grid.

While the ESB has maintained that its system of internal "Chinese walls" meant the transmission operation function was de facto independent of its power supply division, it is now understood to have agreed to formally separate the functions.

But no agreement has been reached on the control of the transmission system itself - the "wires" used to transmit electricity from power stations to customers.

A recent paper from the Attorney General, Mr Michael McDowell, is understood to have suggested that the Independent Transmission System Operator should also have ownership of the system.

The paper is thought to argue that fair competition could not be ensured if the ESB controlled the "wires" between its plants and those owned by competitors.

But it is understood that a compromise is likely, with the ESB retaining ownership of the system.

The issue of control of the "wires" remains in question. Difficulties are reported to have arisen over who would have responsibility for maintaining and repairing the system and its links to various power stations.

The current Transmission System Operator, Mr Kieran O'Brien, is understood to favour his office taking ownership and control over the network when independent. The Commissioner for Electricity Regulation, Mr Tom Reeves, has also argued that the transmission system should be operated independently.

In relation to ESB staff, it is understood that workers are concerned about possible loss of share ownership rights if the ESB was to float in the future.

Some 28 per cent of the electricity market will be opened to competition next Saturday. As no independent power stations have yet been built, a "virtual supply market" will operate at first, with capacity on the ESB's supply network and from the North/South interconnector auctioned to suppliers.