Cuts of up to 20 per cent in electricity costs were predicted yesterday in Edenderry, Co Offaly, when the construction phase of the new £100 million (€127 million) peat-fired generation plant was initiated.

Dr Valerie Kohler, chairman of Edenderry Power Limited, part of the Fortum Group, made the prediction and said such benefits had flowed to the consumer in other countries where power production was deregulated.

She said these reductions had taken time but had been achieved through competition and the application of new technology in power production. The most up-to-date technologies to generate maximum power with the least damage to the environment were being put in place in Clonbullogue where the privately owned plant is being built. The Minister for Public Enterprise, Ms O'Rourke, though not as confident of a price fall, said competition was bound to bring benefits to the consumer. She said yesterday's ceremony was historic since Edenderry would be the first peat plant to be built here in more than 30 years. The last one to open was Shannonbridge in 1965.

The plant's construction was timely, she said, because it would assist in supplying power to an economy which continued to expand and in which electricity demand was growing at 6 per cent annually.

She said it was also significant because it was the first major power plant resulting from open competition process, it signalled the start of competition in the Irish electricity sector and it was the first major power plant to be developed by an independent producer.

It was vital because it ensured the role of peat in providing power. From a Government viewpoint, it was important that Ireland had its own power source.

Ms O'Rourke said it would also copper-fasten up to 500 jobs in Bord na Mona and more than 300 people would be employed there during the construction stage.