The energy regulator will deregulate the domestic electricity market when ESB's market share falls to 60 per cent, it said today.
In a report published today, the Commission for Energy Regulation (CER) said ESB would also have to commit to a plan to rebrand its retail business before the market would be deregulated, allowing ESB to set its own prices to compete with independent suppliers.
At present, the CER sets prices for ESB, and competitors are allowed to undercut these charges.
The supplier currently has about 77 per cent of the domestic market, with independent suppliers such as Airtricity and Bord Gáis making up the rest. Up to 500,000 people have switched supplier since rivals entered the market.
If the current rate of movement continues, deregulation could take place by early next year, CER chairman Michael Tutty said. Business markets, where ESB has a market share of less than 50 per cent, are set to be deregulated by October 1st.
However, the regulator warned that it would not mean that energy prices would fall dramatically immediately afterwards.
"It won't magically reduce electricity prices," said commissioner Dermot Nolan. "But it should lower prices over time."
ESB welcomed the news, saying it was a "significant milestone" in developing a competitive electricity market, and would be a positive step for customers. However, it refused to comment on possible future pricing, and said it would complex to rebrand the supply business.
"Changing a long-established brand is a challenging and complex undertaking that requires careful planning and implementation in order to avoid customer confusion and uncertainty," it said.
Mr Nolan said the regulator would continue to monitor the market for anti-competitive practices and would move to deal with any such moves.
Bord Gáis Energy said it felt it was too soon to deregulate the market.
"ESB has 77 per cent share of the market, and it's still totally dominant in that sector," the firm's head of regulation Padraig Fleming said. "It effectively controls the market for the production of electricity, with over 50 per cent of the power generation capacity and 60 per cent of the electricity energy revenues that flow through the market. By any standard that's a hugely dominant position.
"It's amazing that CER is even considering stepping away from regulating such a dominant operator in a crucial industry to the economy and the consumer."
Mr Nolan defended the decision to remove regulation from the market.
"Regulation is not perfect; it is a blunt instrument," he said. "Generally, everyone agrees that effective competition is better for consumers."
He said consumers would have greater choice as a result, and new products could be brought to market.
The move was welcomed by Minister for Energy Eamon Ryan, who described it as "an "important step" in developing a fully competitive electricity market in Ireland.
"With this decision and the entry into the market of Bord Gáis Energy and Airtricity, competition is increasing. As we move to full deregulation, we will continue to ensure the interests of the electricity consumer remain to the fore,” he said.
The sentiment was echoed by Labour Party spokeswoman on energy Liz McManus, but called for a drive towards renewable energy in the electricity sector.
"As a result of the inevitable increase in the price of oil and the resultant concerns over utility bills, I am urging the Government to implement a real, radical energy efficiency programme," she said.
"There are literally thousands of unemployed construction workers who should be put to work insulating our housing stock and retrofitting our schools and hospitals."
