Decision on ESB break-up in fortnight

THE GOVERNMENT has just two weeks to decide on the proposed break-up of State-owned energy company the ESB.

The Government is committed to transferring ownership of the national grid, the network that transmits electricity from power plants to the distribution system that delivers it to customers, from the ESB to another State agency, Eirgrid, which manages it but does not own it.

ESB workers and some of the company’s management are opposed to the move, and its unions have threatened to take industrial action to prevent it happening.

EU energy market regulations oblige the State to transfer the national grid to Eirgrid, but the Government may seek a derogation from this. The directive has to be made law by March 3rd, which means that time is running out for a decision.

The Government is likely to decide by the end of the month. The Cabinet discussed a report on the issue shortly before Christmas, and it is due to be discussed again before a decision is made.

It is understood that the Department of Communications, Energy and Natural Resources has already prepared the legislation needed to split the ESB, as the Government first committed itself to taking this step four years ago, shortly before the Coalition was elected.

However, the report, which went to Cabinet in December, argued that the Republic could have a strong case for a derogation from the directive, and there is now a possibility the Government could go this route.

The report, the result of a review carried out by former Irish National Petroleum Corporation chief executive Fergus Cahill, looked at the various options for splitting the company. It argued that a transfer could result in a cost to the exchequer.

If it loses ownership of the grid, the ESB has said it wants fair market value in return for the loss of the asset. This would involve the State effectively writing a cheque for the value of the grid, which is estimated to be worth about €1.5 billion.

Sources say there is no guarantee that the EU will grant the Republic a derogation as there is a strict legal test involved in qualifying. A decision to seek a derogation would take the issue off the table in the run-up to an election.

The Government’s decision is expected around the same time that economist Colm McCarthy is due to report on a review of State companies and assets he began earlier in the year at the request of the Department of Finance.

This is expected to recommend the sale of at least some State companies and assets.

Similarly, under the terms of the EU/International Monetary Fund bailout deal, the Government has committed itself to reviewing the State’s ownership of energy companies, with a view to the sale of some of these businesses to the private sector.

Two State-owned companies, the ESB and Bord Gáis, compete with each other in supplying electricity and gas to businesses and consumers.

A third, Bord na Móna, is involved in power generation and has plans to invest in a range of green energy operations.