Analysis: While the Government may be anxious to reduce the ESB's dominant position, it would face huge practical difficulties selling off key assets, writes Emmet Oliver.
Politicians traditionally tread carefully around the question of privatising or selling off any part of the ESB. The controversial flotation of Eircom made politicians understandably nervous and the energy minister, Mr Dempsey's predecessor, Mr Dermot Ahern, said he could never envisage any part of the ESB being sold off.
Essentially the prevailing political view has been that the ESB owns important infrastructural assets and these should not fall into private hands.
However, private sector competitors and other industry observers argue that, while electricity distribution and transmissions systems represent key infrastructure, individual power stations do not.
In recent weeks the management of the ESB has floated a proposal to sell or lease out some power stations, presumably to private sector competitors. The proposal is seen as a possible way to address the ESB's dominance in electricity generation in the Republic.
This dominance is clear for everyone to see - Viridian is the only company currently providing any large scale generation competition to ESB. Yes, there are smaller players like wind energy company Airtricity, but it is very much a niche operation.
Two other companies, Aughinish Alumina and Tynagh Energy, are currently building new generating stations, but their arrival into the industry will still leave the ESB with at least 60 per cent of the generating capacity of the Republic.
This is something the Minister for Communications, Marine and Natural Resources, Mr Dempsey, is determined to do something about. But what?
The ESB derives its dominant position from the sheer number of stations it holds in its portfolio - 19 at the present count. Staff in these stations are paid relatively well and have good conditions and strong union representation.
If Mr Dempsey tried to sell these stations into the private market, the question is whether the unions would consent to his plan? Would their present position be maintained? The spokesman for the ATGWU in the ESB, Mr Brendan Ogle, has already outlined his trenchant opposition to any sell-off plan.
The other problem is that the ESB's generation portfolio is very old. Some of the stations suffer from regular breakdowns (known as outages) and maintenance costs are high. Some are also highly uneconomical and only survive thanks to subvention via what is known as the public service obligation (PSO) levy.
Mr Dempsey's first problem might be who would want to buy the stations, at least in their current guise. An additional issue is where the proceeds of any sale would go? Back into the ESB's coffers? Would the company then be prevented from building any new generating stations?
While selling off or leasing individual plants would be difficult enough, selling-off larger parts of the ESB would be even more challenging. Which parts of the group would the Government sell off?
Essentially the ESB group, as a vertically integrated utility, is split into divisions which are ringfenced from each other. The generation business, ESB Power Generation, operates the 19 power stations around the State.
The company also owns ESB Networks, which owns and maintains all the sub-transmission, medium and low voltage electricity network infrastructure in the State. Effectively this division owns the wires that bring electricity into homes. It also owns over 5,000 kilometres of high voltage transmission lines and cables, although this activity is managed by ESB National Grid, a ring fenced entity due to become EirGrid at some stage in the future.
On top of these distribution and transmission activities, the ESB also owns ESB International, an overseas consultancy and investment vehicle.
The final segment of the group is ESB Customer Supply, which is the part most people deal with on a day-to-day basis. It supplies power to domestic homes and its prices are regulated by the Commission for Energy Regulation.
All these assets are undoubtedly highly valuable and could be worth several billion euros. But they are essentially pieces of infrastructure that need to be open to all industry users and need to be tightly regulated.
The challenge of selling off such sizeable assets would be considerable. While Mr Dempsey is unlikely to go this far, he might still attempt the more modest project of selling off individual plants in an attempt to stimulate the market and make ESB a less central player.
The Minister has spoken before about trying to tackle the dominance issue. In December he told The Irish Times the issue of ESB dominance in the market had to be dealt with. "There is a certain truth in the argument about 'we must stay together and we will be stronger and we will be able to do this, that and the other'. But when you have such a large share of the market you set the prices and everything else. You are in a position, and I'm not saying ESB is doing this, but you can keep the opposition out and fix prices at such a level that it makes it unattractive for others to get into the market."
He said this position was not necessarily a good one for the years ahead. "From the point of view of the consumer, it is not good just to have one very dominant player in the market."
But he said at that time that there were no plans in the Government for the privatisation of the ESB.
