Power shortfall costs customers an extra €75m

Irish consumers and businesses are paying an extra €75 million a year for electricity because the Republic's generating plants are performing below their full capacity, an Oireachtas committee heard yesterday.

Mr Kieran O'Brien, managing director, ESB National Grid, told the Joint Oireachtas Committee on Communications, Marine and Natural Resources that generating plants were delivering between 500 megawatts (mw) and 800mw below the levels they achieved in the 1990s.

Mr O'Brien said a benchmarking survey carried out in the US and other countries showed that the plants, operated by the ESB, should be able to deliver the extra power.

"Based on the difference between current performance and best practice, this would save about €75 million a year," he told the committee in a submission.

Energy commissioner Mr Tom Reeves has proposed an incentive/penalty plan that could leave the State company facing fines of up to €12 million if its power plants did not perform up to standard. Overall, its plants are delivering 76 per cent of their full capacity. Mr O'Brien said the shortfall was equal to two modern gas-fired plants. The shortfall means the national grid has to keep more power stations available at any one time to deliver electricity than would be necessary if all plants were delivering at capacity. This accounts for most of the extra €75 million cost to consumers.

Mr Pat Mangan, manager, power systems operation, told the committee that of the State's total 5,200mw capacity, just 4,200mw was available. ESB National Grid expects that demand next winter will be 4,500mw.

Mr Mangan said the grid had contracted for 200mw in extra capacity that would be on line at the end of the summer, and added that the grid intended making up the shortfall from Northern Ireland.

However, he warned that there could be problems in the winter of 2005/06. "We will be depending on the commissioning of further generating plants. The Commission for Energy Regulation \ has awarded two new contracts to independent operators, but from what we can see of the progress being made on those two plants, it's not obvious to us that the plants will be ready to meet demand in the winter of 2005/2006," Mr Mangan said.

Mr O'Brien told the committee that electricity prices had increased by 24 per cent over the past three years. He argued that prices would be alleviated by greater competition, but warned that the ESB's continued dominance in the market remained a barrier to this.

He added that ESB National Grid would be advocating a "gross pool" system of electricity supply to the CER in a submission.

In a gross pool system, generators supply electricity to an independent grid operator, which takes the cheapest power supplies first.

ESB National Grid operates a ring-fenced division of the ESB that operates independently of the State company.

It manages the transmission system - the means by which power gets from the plants to the consumers. Eirgrid is due to take over this role. Mr O'Brien is chief executive designate of Eirgrid.