Viridian is considering taking legal action against the Government because it claims the Electricity Regulation Bill, which aims to deregulate the sector, would contravene an EU directive and unfairly favour the ESB.

Viridian has received planning permission for a £300 million (€380.92 million) gas-fired plant at Huntstown, Co Dublin, but has told the Minister for Public Enterprise, Ms O'Rourke, that the Bill, going through the Oireachtas, will hold back competition in the sector.

The Bill was introduced because EU directive 96/92 obliges EU states to open up their electricity markets by February 2000 at the latest.

But in meetings with Ms O'Rourke and Mr Tom Reeves, the new electricity regulator, Viridian said the Bill did not properly reflect the directive's content. The Bill states that the new Electricity Commission, headed by Mr Reeves, which will oversee the sector, "shall grant to the ESB a licence to generate and supply electricity to customers". The Commission, however, "may grant or may refuse to grant a licence" to other competitors.

Viridian says this means the ESB will automatically be granted licences for its plants, while projects by other companies may not receive authorisation.

It claims its legal advice supports this view.

It also claims that, despite a written request, the ESB has failed to provide it with the list of prices it intends to charge competitors for using its distribution network.

An ESB spokeswoman last night declined to comment on Viridian's claims. But other sources said the company believes that, until the Bill becomes law, there is no reason for ESB to provide information to competitors.

The ESB has received planning permission from Dublin Corporation for a £200 million gas station in Ringsend, Dublin.

The Bill comes before the Committee of Public Enterprise and Transport on Tuesday and sources said yesterday the Opposition was likely to table an amendment that deals with Viridian's concerns.