The ESB agreed last night to abandon tie-in clauses for large companies using its `Optisave' contracts for electricity, after the Competition Authority threatened legal action against the State company for what were seen as breaches of the Competition Act.

The contracts required companies to purchase electricity from the ESB for a period of five years. The ESB's monopoly on provision of electricity to large companies comes to an end in February 2000. The tie-in under the Optisave scheme affected precisely these customers.

In a statement, the Competition Authority said it had objected to a clause which provided that, following the liberalisation of the market, a customer who was offered electricity on cheaper terms by a competing supplier would have been required to give details of such an offer to the ESB, and allow the State company an opportunity to lower its prices.

The customer would only have been allowed to switch to another supplier in the event that the ESB failed to match or offer a lower price, in which case the customer would have been required to give the ESB six months notice of termination, the authority said.

"The agreement also provided that, where the ESB reduced its prices in response to a competing offer, the customer could not submit a second offer for six months from the date the price was reduced," the statement continued.

Under the scheme, customers were also prevented from submitting alternative offers to the ESB in advance of the market being opened up to competition, the authority said.

Sources at the Competition Authority said the Optisave scheme was brought to the agency's attention in August, and that it acted very swiftly. In a letter to the ESB, the Competition Authority said parts of the agreements ran contrary to the Competition Act, threatening prosecution within 14 days if the scheme was not amended.

A spokesman for the ESB said last night the company would fully comply with the authority's request.

The Optisave scheme was introduced in June as an incentive to medium and maximum demand high voltage customers to spread their use of electricity throughout the day, he added, and this was the principle advantage for the ESB.

"If these customers respond to such encouragement, the result will be a more efficient use of ESB's assets and relief of pressure on limited generating capacity," the spokesman said.