THE ESB is in advanced negotiations with the Department of Energy on the introduction of a special levy on all electricity users after 1999. The group is insisting that the levy be introduced to cover the cost of its social commitments after the Irish electricity market is opened up to other EU power operators.

The company has told the Minister for Transport, Energy and Communications, Mr Lowry, that such a levy will have to be universally applied if the ESB is to remain competitive. It would ensure the company was not financially disadvantaged by having to supply remote rural areas or by being required to use peat as fuel in its power stations, for instance.

This social cost, it insists, is already reflected in its prices to customers in the Republic and, if the levy plan is adopted, it will not lead to price increases of more than the 6.5 per cent sanctioned by the Government to be spread over the next three years. Only customers of any new suppliers would be affected, in practice.

The negotiations are part of the ESB's on-going preparations for competition in 1999. Yesterday, the group outlined a five-year business strategy which shows that it is planning to undertake a substantial overseas investment programme and make its domestic electricity generation and supply businesses profitable.

Announcing the new strategy, ESB chairman, Mr Billy McCann said the company must urgently make profound changes in the way it operated if it was to achieve long-term commercial success.

Efforts to restructure the group's various businesses and to introduce more efficient work practices have already begun under the Cost and Competitiveness Review. The review aims to reduce ESB staff numbers by 2,000 over the next two years, a move which the company says will yield annual savings of £58 million.

Over the next five years the company says it intends to concentrate on profitable opportunities in the Irish and international electricity markets.

It plans to improve and expand its services to customers in the Republic and is preparing to adopt a customer charter which guarantees a high level of service.

In line with other leading international utilities, the group's senior management have set down financial performance targets for the group to be achieved over the five-year period.

As an initial target, the board has said it expects the group to achieve a 12 per cent return on capital employed over that period. This will be reviewed every two years.