Proposals from the energy regulator aimed at ring-fencing parts of the ESB will force board members to be in breach of their legal obligations and are "totally unacceptable", the State-owned company has warned.
In what is likely to turn into a major row, the ESB has reacted angrily to a new licence the energy regulator is proposing to award to the company. On October 6th the regulator, Tom Reeves, issued a draft interim licence to ESB, which allows it to operate as a public electricity supplier.
However, in recent weeks the company has responded to the terms of this licence and has strongly warned Mr Reeves about its implications. He will now have to decide whether to accept the ESB's arguments. Mr Reeves leads the Commission for Energy Regulation (CER)
The ESB has even threatened to go to the Minister for Communications, Noel Dempsey, to get a legal indemnity to protect its directors. Mr Reeves is attempting to ring-fence the ESB's power-generation business from its customer-supply business, so that it is clear that transactions between these companies are done on an arms-length basis.
However, the ESB claims that the regulator's requirements are so restrictive that they could "impair the proper governance of the business".
The draft licence issued by Mr Reeves prevents ESB power generation and ESB customer supply from disclosing commercially sensitive information to personnel in each company, unless explicitly approved by the regulator. The CER is to determine what information is commercially sensitive.
The ESB warns that such rules would prevent information being made available to the board and would prevent the proper execution of the business planning process. "The CER is simply not entitled to impose licence conditions which prevent the proper discharge of corporate responsibilities. The CER does not have the power to require ESB board members to act in contravention of the law, which is what the proposed licence condition would entail. Nor does the CER have the power to amend the law relating to the duties of board members," says an ESB document.
The strength of the opposition of the ESB could force Mr Reeves to back down on his proposals. The ESB document warns that it may approach the Minister on the matter. "By way of remedy, ESB board members will need to seek an indemnity from the Minister in that they cannot discharge the duties which they were appointed to discharge," it states.
It says that, ultimately, any provision that seeks to limit the proper flow of information within the company will affect board members.
"Therefore board members cannot exercise due diligence in the discharge of their duties and cannot have adequate oversight of the affairs of the company. Thus board members will be acting in breach of their legal obligations in that capacity," it states.
Meanwhile, Mr Reeves is continuing to study the idea of adding a "fuel variation clause" for domestic ESB bills. This clause would mean that electricity bills would rise or fall on the back of movements in global oil and gas prices. The idea, which was first mooted by his office almost two years ago, is to be the subject of a consultation process over the next few months.
Generators have warned that introducing such a measure would have major implications for their billing systems and would need to be phased in over a long period of time.
Under the measure, each two-monthly bill would be adjusted to take account of changes in world fuel prices. At present this is done on an annual basis.
