The Competition Authority has questioned the ESB's ownership of the electricity network in the newly deregulated power market.
In a paper submitted to the Department of Public Enterprise, the body said the separation of the ESB's National Grid operation from the core company did not go far enough to ensure fair competition.
It said arguments in favour of the ESB retaining the transmission and distribution system ignored the "overwhelming conclusion" that a generation company which owns such assets "will naturally favour itself" at the expense of customers and reliability.
The paper has not been published yet. It is believed to state, however, that the ESB's retention of its "non-competitive" transmission and distribution assets and its "competitive" electricity generation business was unwise from a competition perspective.
The National Grid, which controls when individual power stations feed electricity into the network, was separated from the ESB when 27 per cent of the market was opened last February.
In theory, this meant the ESB could not favour its own generation stations over more efficient competitors when deciding which plant to switch on and off as demand for power fluctuates.
But the authority's response to the Statutory Instrument behind the separation - which renamed the National Grid as Eirgrid - said more should be done to ensure the market operates fairly.
The paper said: "Some argue that as long as there is an independent operator of the underlying transmission system, ownership of the transmission system can remain in the hands of an upstream generation operator.
"In accordance with this line of argument, the shift of operational control of electricity transmission to Eirgrid would mean that discrimination in dispatch [of power] and other operations would not be possible. However, the Competition Authority considers that this argument ignores the overwhelming conclusion that the generation company that owns the transmission lines will naturally favour itself."
The Statutory Instrument followed complex talks which led to an agreement between the ESB, its trade unions and the Minister for Public Enterprise, Ms O'Rourke.
When Eirgrid was formed, the ESB retained ownership and responsibility to develop and maintain the high-voltage national transmission system and the low-voltage local distribution network.
The authority says these, too, should be separated from the ESB to ensure the competitive market functions fairly, according to a person familiar with its paper.
This would ensure equal access to the power network and an objective, transparent, non-discriminatory treatment of all electricity generators in the market, it said.
The paper argues the ESB has an incentive to allocate as many costs as possible to the operation of the transmission and distribution system.
