The ESB could lose significant revenue if it does not improve the efficiency of its older power stations under a new plan from energy regulator Mr Tom Reeves, writes Emmet Oliver

The ESB was informed this week that its stations must be available to the National Grid more often during the year and breakdowns or "forced outages" must be reduced. Forced outages occur when stations leave the grid because of mechanical or electrical failure.

Mr Reeves has informed senior ESB management that if there is no change the firm will face serious financial penalties that will be outlined shortly.

On average, only 78 per cent of total generation is available at any one time, according to the National Grid. It is understood Mr Reeves would like to see this figure rise to 82 per cent.

He told a meeting of the Oireachtas Committee on Communications and Natural Resources yesterday: "We are not getting proper use of these stations." He said recent performance had been "pretty awful".

"We need much tighter performance criteria or else it will cost ESB money. I am exploring ways of linking ESB revenues to improvements in availability of all ESB power stations," Mr Reeves told the committee.

At present, the ESB's power-generation arm is allowed to recover certain revenues each year in what is known as a bulk power agreement. But under Mr Reeves's plan, this revenue may be reduced if the firm's stations do not achieve certain targets.

The ESB has several stations which suffer regular breakdowns, mainly due to age but Mr Reeves has insisted that performance must be improved. He is also determined that the ESB will not be allowed to make up the revenue loss by charging end customers more. Mr Reeves must approve all ESB price rises.

Mr Eamon Ryan, Green Party TD, agreed with Mr Reeves and said "clapped out" ESB plants were more of a threat to the National Grid than wind energy.

Mr Reeves was severely criticised at the meeting by some members, especially Mr Tommy Broughan TD, from the Labour Party. He said there was little point to regulation if prices kept rising. "What is the purpose of all this?" he asked Mr Reeves.

The regulator replied that several EU directives had to be implemented and energy prices were governed by several factors.

"There are a number of underlying factors which have led to such increases, namely increased investment in networks, increases in fuel prices and the need for investment in winter peaking plant. In addition, contracts with ESB underpinning peat generating stations and renewable forms of generation have resulted in increased prices to customers."

But he added that independent suppliers in the market were offering discounts against ESB prices.

Mr Reeves expressed deep frustration with the failure to set up ESB National Grid as an entirely separate entity known as EirGrid. He said he was not "washing his hands of the situation", but he did not have the statutory power to resolve the complex issues involved.

He said he had written to the Minister for Communications, Mr Ahern, last December on setting up EirGrid and suggested some possible alternative approaches. He said the Minister appeared to favour the existing plan. "There it rests," he added.