The Government's suggestions about how it might introduce competition in the electricity market are likely to prove unattractive to the industry and make prices more expensive, the business lobby group IBEC said yesterday. A report commissioned by IBEC said the proposals, as they stand, could also lead to capacity shortages.
"It is of serious concern to the business community that proposals as fundamentally flawed as these should go ahead," said Ms Rosemary Stein, IBEC's assistant director of trade and industry affairs.
"It is ironic that proposals designed to introduce competition and lower prices could actually have the opposite effect."
A spokesman for the Minister for Public Enterprise, Ms O'Rourke, stressed that the Department's ideas were part of a consultative process and said the IBEC report was "a most welcome submission".
A number of organisations with an interest in the electricity sector had made submissions to the Minister, and these were being examined in detail.
He said Ms O'Rourke was looking forward to meeting IBEC to discuss its concerns.
The report, published yesterday ,was carried out by British electricity specialists London Economics and analyses the Department's consultation paper, published in May.
It characterised the Government's proposals as lacking clarity and practical detail.
According to the report, there were several fundamental problems with the Department of Communications approach. These included price reductions not being listed as an explicit and primary objective and that social and political obligations such as maintaining peat-burning stations were not properly reconciled.
There were also various problems with the structural model, according to London Economics.
It was unclear, for example, whether the regulator would be able to force the central electricity buyer, known as the power procurer, to purchase high-cost capacity from socially-desirable plants, said the report. Under an EU directive, around 28 per cent of electric power should be open to competition by the year 2000.
The Department's document offers two proposals to determine which customers were eligible for this; the top single-site users, around 500 in all, or the top users including aggregated consumption by retailers, schools and hospitals.
IBEC said yesterday that only big industrial users should be allowed to benefit at first.
The State, as owner of the ESB, could be faced with a conflict of interest, according to the report, and the ESB may shift some of its risks from one part of its operation to others, forcing consumers to pay. It may also underestimate future capacity rather than risk producing too much.
Also, the report added, there was no reason why the regulator should not be answerable to a Dail committee rather than directly to the minister.
The chairman of IBEC's energy policy committee, Mr Brian Sweeney, said the London Economics report was "very worrying".
