Domestic users of electricity will be able to buy power from independent suppliers within five years, under proposals published yesterday by the Minister for Public Enterprise, Ms O'Rourke.
The proposals, the product of negotiations between the Department of Public Enterprise, ESB management and unions, set out the framework for a five-year transitional regime for full liberalisation of the market. Cheaper electricity is promised for all users.
According to Ms O'Rourke, the transitional regime will facilitate the advent of at least two new power producers to compete with the ESB in the Republic by 2002. These are in addition to the ESB's own proposed joint venture plant at Ringsend in Dublin. This should amount to liberalisation of about 40 per cent of the total electricity market and will enable medium-sized industrial power users to shop around for cheaper electricity.
An independent Transmission System Operator (TSO) will be established separately from the ESB and will form a new, independent State-owned company. Its board will be appointed by the Minister and will be a State body in its own right. It will determine the tariffs for the use of the system.
The issue of ownership and control of the TSO created tension between the ESB, which sought to retain control of the transmission system, and the Department of Public Enterprise which favoured independence.
Ms O'Rourke said yesterday that the establishment of the TSO was a vital step towards liberalisation. "I have taken great care, in consultation with the Attorney General, to ensure that it is structured in a manner which is capable of engendering confidence in the industry," she said.
Under the framework, the ESB will continue to own the assets. As asset owner, the ESB will maintain the grid and carry out all construction work. But the proposals give the new Commission for Electricity Regulation certain rapid step-in rights in case of delay by the ESB and an arbitration function between the TSO and the ESB, enforceable by the High Court.
However, the Fine Gael spokesman on Public Enterprise, Mr Ivan Yates, said the retention of assets by the ESB could create a future conflict of interest and called on the Government to refer its decision on the TSO to the European Commission.
"There is no proposal to transfer the assets of the transmission system to the new semi-State company at any date in the future. I have no doubt this will be legally challenged by new independent power generators," he said. IBEC's energy executive, Mr Declan Flanagan, said the new company operating the TSO system under a contract with the ESB would require very close regulation to ensure it didn't hamper the development of competition.
Ms O'Rourke said the framework proposals outline the need for a "significant change programme within ESB" to maintain competitiveness. A voluntary severance scheme and financial support for reskilling would be a key requirement, as well as maintaining shareholder support.
Under public service obligations included in the framework, two new peat stations are to be built to replace existing stations. These stations, she added, would operate in line with environmental best practice. They will be owned by ESB and customers will be charged a levy under a socalled public service obligation.
Both Viridian and EPower, two consortiums with plans to enter the electricity market, cautiously welcomed the Minister's statement. But they said further clarification on the day-to-day working of the TSO was needed.
A spokeswoman for the ESB said the company welcomed the Minister's announcement and recognised the challenges ahead.
Some 28 per cent of the electricity market will be opened to competition tomorrow.
