The electricity regulator, Mr Tom Reeves, has admitted he does not have the authority to break up the ESB ahead of full market opening in 2005.
Mr Reeves, in a background paper circulated within the electricity industry, acknowledges there is some support for breaking up the ESB into various privatised entities, but says there is no mechanism for taking such action.
Several influential bodies - including the International Energy Agency - have suggested the Government should consider breaking up the ESB so that individual plants start competing with each other. But Mr Reeves, while acknowledging this would go some way to addressing the ESB's dominance, says several factors make this impossible.
He points out that his organisation, the Commission for Energy Regulation (CER), "does not have the authority to order such structural changes". Major structural change "involves extensive time to implement", so even if a decision was taken today to break up the ESB, the process would not be completed in time for full market opening.
He also says the large size of the ESB's power plants relative to the size of the Irish market means major "mitigation measures" would be needed to ensure the process happened smoothly.
Instead of radically altering the ESB's overall structure, he says, the CER favours a "comprehensive regulatory approach" to manage the ESB's market dominance.
"CER is not ruling out future structural changes to ESB, but will develop a regulatory approach that will, in the absence of any structural reforms, ensure a market that works well and will achieve many, if not all, market benefits," says the document.
Mr Reeves has asked interested parties in the electricity industry to submit their views by February 23rd on his paper.
Mr Reeves says if his approach works, non-ESB companies should perceive a market that is working properly and is competitive. He says ESB plants should behave as if there was a privatised market.
"The regulatory approach should be a simple set of regulatory rules that work effectively and predictably. This regulatory approach is likely to be a temporary thing, needed only so long as ESB remains a dominant participant," says Mr Reeves.
In coming months, Mr Reeves will formulate proposals on how the ESB will be regulated. In this paper he suggests each station might have to acquire a licence and certain conditions will be inserted into this licence. He warns that ESB plants will have to make incremental investments and operate with more flexibility.
He also suggests that power stations will be provided with financial incentives to make themselves available at times of high demand.
