THE Government has abandoned its proposal to make the ESB responsible for providing an independent power procurer for the Irish energy market from 1998.
This follows advice from the Attorney General, Mr Dermot Gleeson, that such an arrangement would be in breach of EU competition law.
The procurer will be responsible for buying electricity power stations at competitive rates and selling it on to the consumer through electricity distribution companies. The ESB will operate in the power generation and distribution markets.
It had been told last June that it would also be responsible for the provision of the power procurer, who would operate through an autonomous subsidiary. The company was unhappy about the proposal, which was also criticised "as fundamentally flawed by the Fianna Fail spokesman on energy, Mr Seamus Brennan, and the Irish Business and Employers Confederation.
A spokeswoman for the Department of Transport, Energy and Communication said yesterday: "It is intended that under the proposed long term restructuring legislation the power procurer would be established as an independent body [from the ESB]."
The decision to separate the power procurement function from the State electricity company is a reversal of the policy adopted by the Minister for Transport, Energy and Communications, Mr Lowry.
Mr Lowry has accepted that the ESB's ability to compete for new business could be compromised if it was also given responsibility for regulating the energy market. Such an arrangement would leave the awarding of contracts by the bower procurer to the ESB open to challenge by unsuccessful bidders under EU competition rules.
The problem was drawn to the Government's attention by the Attorney General some time ago, but the ESB and its group of unions were informed only last week.
Mr Lowry advocated leaving the power procurement function with the ESB, and it is understood that last week the company and the unions were asked by senior Department officials to agree that the ESB should not enter the competition to build a peat fired power station planned for the east midlands.
The £85 million station, to be 25 per cent funded by the EU, is the first to be built through competitive tender. All other public utility power stations in the State have been built by the ESB. But the exclusion of the ESB from competing for the station could have set a precedent that would, have excluded it from competing, for other power station contracts in the future.
The ESB and unions made it clear last Friday that the £270 million Cost and Competitiveness Review at the company would be threatened if the ESB was prevented from competing for the midlands station. The Minister agreed on Monday to appoint an independent group of experts to carry out the competition, thus ensuring that the ESB could participate and opening the way for the unions to endorse the CCR.
However, events last week mean the ESB has yet to endorse the CCR. It will probably do so, when the changes to the new legislation are finalised and the company is satisfied there are no legal obstacles to it competing for new contracts.
The Department spokeswoman also said the Government intended appointing the regulatory commission to monitor competition during 1997.