Serious reservations over the benefits of electricity deregulation were expressed yesterday as customers were hit with a 5 per cent price rise. Politicians, private electricity firms and business organisations reacted angrily to news of the rise which takes effect in January.

The ESB pointed out, however, that most of the increase related to factors outside its control.

The company said that of the 5 per cent rise, 2 per cent was the cost of bringing in extra capacity to prevent shortages this winter; 1 per cent related to green energy projects and peat stations, while 0.5 per cent was needed to pay large customers for managing their supply more efficiently.

The rise was sanctioned and announced yesterday by the electricity regulator, Mr Tom Reeves.

He said the increase of 5.09 per cent would affect customers in different ways. Domestic customers would pay 5 per cent, small and medium-sized businesses would pay 4 per per cent and large customers would pay 6 per cent.

The Fine Gael spokesman on communications, marine and natural resources, Mr Simon Coveney, said three years ago the Government began the deregulation process, but it had been a failure to date.

He said the Government needed to adopt a more aggressive approach by attracting more competitors into the electricity generation market place.

Small business lobby ISME said the idea of deregulation was to reduce the cost of electricity but in the last three years price increases of 27.4 per cent had been granted.

The director of the Small Firms Association, Mr Pat Delaney said: "This latest increase raises the question of who is benefiting from the liberalisation of the energy market, because it is certainly not business users."

The private electricity company, Energia, also reacted negatively to the announcement.

Mr Gary Ryan, sales and marketing manager at Energia, said the factors driving prices up were not open to competition and therefore customers were failing to reap the benefits of market liberalisation.