AN EU ruling that could force the Government to break up the ESB moved a step closer as MEPs voted in favour of introducing a law requiring big power companies to separate their generating and distribution businesses.

Last year, the Government proposed taking ownership of the national electricity grid from the ESB and giving it to State agency Eirgrid, which already manages, but does not own, the network.

However, Minister for Energy Eamon Ryan has since ordered a review of that plan, after various groups, including the ESB unions and its employee share option trust, opposed it.

The unions balloted to strike if the plan went ahead. Mr Ryan stressed that it remained Government policy.

The European Parliament in Strasbourg voted late on Wednesday in favour of bringing in Europe-wide legislation that would force big power utilities to sell off their distribution networks. MEPs believe such a move would boost competition in the EU's energy markets, as taking control of distribution away from powerful groups would encourage new entrants.

The vote does not mean such a law will be passed, but industry sources said yesterday that it could influence the EU Council of Ministers, which has the final say on the issue, to come down in favour of introducing such a law. "It shows the direction that political thinking is going in Europe," one source said yesterday.

The council met recently to discuss energy policy, but did not make a decision. Some member states, particularly France and Germany, home to such big power companies as Eon and EDF, are opposed to the move.

They argue it would leave their utilities vulnerable to takeover by rapidly growing Russian operators such as Gazprom. Instead, they favour the approach already taken in the Republic, where the ESB still owns the grid, but Eirgrid manages it independently.

Fears for the security of future energy supplies are growing in the EU, which imports a lot of the oil and gas it uses.