The Government is to move quickly to establish an electricity regulator, and is likely to bring a bill before the Oireachtas by October, it emerged last night.

The decision will remove the regulatory power from the ESB for the first time since 1927.

In recent months most of the companies and groups interested in the future of the industry have participated in a written consultation session with the Minister for Public Enterprise, Ms O'Rourke. They were asked their opinions on proposals for implementing an EU competition directive. Yesterday, she thanked them, by letter, for their participation.

"I have been impressed by the weight of arguments made in favour of the early establishment of a regulatory office to act as a spur in the process of implementing the directive," Ms O'Rourke said.

"These views coincide with advice I have received from the Attorney General that an office of regulator should be established to take over the function of issuing permits for the generation and supply of electricity," the letter continues.

Industry sources last night suggested that the advice given by the Attorney General stemmed from the interest of both Marathon and Northern Ireland Electricity in establishing power plants in the Republic. Under current legislation, the ESB - in effect a rival company - would formally regulate such new entrants, a situation that could be the subject of a legal challenge.

"In the light of the above," the letter continues, "I wish to let you know that I intend to seek Government approval for the introduction of legislation providing for the early establishment of a regulatory office. I expect that this will be a relatively short bill, containing the minimum provisions necessary for a regulatory office to function effectively."

The market is attractive to electricity companies. For the past decade, volume has been growing at around 5 per cent each year, and new generating capacity will be required in the near future.