Transfer of ESB's grid may cost up to €150m

SPLITTING UP the ESB will cost the State energy company up to €150 million, consultants hired by a group representing worker shareholders have told a body established to review the proposal.

The Government is proposing to split the ESB and transfer ownership of the national grid – its key electricity transmission network – to Eirgrid, the State body that currently manages the grid.

After meeting opposition from a number of quarters, including the State body’s group of unions and its employee share option (Esop) trust, which owns 5 per cent of the company, it referred the issue to a review body chaired by Fergus Cahill, former chief executive of the Irish National Petroleum Corporation (INPC).

Consultants hired by the Esop have told the review body the transfer will involve taking between €1.2 billion and €1.6 billion worth of assets from the ESB and transferring 200 staff from the company.

The consultants, British-based firm LECG, warn that the extra cost to the ESB, including staff compensation, could run to between €103 million and €151 million.

The consultants say the current arrangement, under which the ESB owns the national grid but it is managed by another State body, Eirgrid, is working well, and argue that there is no benefit to be gained from splitting up the company. Doing so could deter new investment, they say, at least during the transition period.

The EU wants member states to separate the ownership or management of power generation and supply from national grids to encourage competition, but allows them a number of options for doing this.

The Government has said that as a matter of policy, it intends splitting up the ESB’s generating and transmission businesses altogether.

Independent operators competing with the ESB support the plan and say it will boost investment in the Irish energy market and help to cut electricity prices.

They argue that allowing the ESB to keep ownership of the grid means there is a risk that independent operators will be discriminated against, which will in turn damage competition.

However, the consultants’ report says the current system, which allows the ESB to continue to own the grid, which is independently managed, is unlikely to result in the State company’s competitors facing discrimination.

They say international experience has found that this does not happen. Their report points out that the ESB has no influence over Eirgrid’s decision-making, which is independent and subject to supervision by the Commission for Energy Regulator, the State’s industry watchdog.

Another key argument against allowing the ESB to retain ownership of the grid is that it would influence investment in the asset itself. The consultants point out that Eirgrid is already investing in developing the grid.

The State company is building an interconnector linking Ireland with Wales which will allow electricity to flow from one country to the other. Eirgrid plans to spend €4 billion redeveloping the national grid between now and 2025.