The final bill for upgrading the State's largest power station at Moneypoint in Co Clare is set to total €360 million, the ESB has revealed.

Addressing the Joint Oireachtas Committee on Communications and Natural Resources, ESB chief executive Mr Pádraig McManus said two separate tasks had to be carried out at the coal- fired plant, which produces more than 900 megawatts of power.

He said that, to meet strict emissions targets, the station needed to install de-sulphurisation technology to lower the amount of sulphur dioxide (SO2) produced by the plant. He said the estimated cost was €250 million.

However, he acknowledged that a separate "mid-life overhaul" of the plant was also needed, which would bring the overall cost up to €360 million. He said the overhaul was necessary to ensure the plant could remain efficient in the future. The ESB board is due to discuss the issue today.

According to sources, the board is likely to back the plan to install the desulphurisation technology and will reject the alternative of making Moneypoint a gas-fired plant.

At the Oireachtas meeting the company's executive director for power generation, Mr Michael McNicholas, said the issue of fuel diversity had to be borne in mind. He said that, with gas prices rising, the ESB had to balance its costs among several different fuel sources, not just gas.

Regarding Moneypoint, Mr McManus said the ESB was proposing "a progressive least-cost solution" to Government.

"A part of this proposal is the fitting of advanced emission-control technology at Moneypoint if the plant is to remain operating in the longer term," he said.

The key decision will be who pays for the plant upgrading.

One option is for the ESB to absorb the cost, while the alternative is for the energy regulator, Mr Tom Reeves, to pass the cost on to customers. It is possible that, following negotiations, a combination of these options will be agreed.

In answers to members' questions, Mr McManus said the best way to increase competition would be to create an all-Ireland energy market and build an interconnector with Britain. He said this would pave the way for a larger regional market, which could prove appealing to other electricity firms.

Mr McManus added that he was concerned about recent price increases. "The primary raw material for the production of electricity is fuel, so all generators... are highly susceptible to shifts in fuel prices. The cost of fuel represents 50 per cent of the cost of generation.

"Primarily, coal, gas and oil are burnt in our stations, all largely imported. The headlines recently have concentrated on oil prices, which are at a 21-year high. However, added to this, the price of coal has doubled over the past year and the price of gas has also increased by about 50 per cent," he said.

"Given the current volatility of fuel prices and the likelihood that this volatility will continue, we are now in discussion with the Commission for Energy Regulation with regard to the possibility of introducing a mechanism to deal with this issue," said Mr Reeves. "It is not feasible for ESB alone to absorb these fuel price increases, as this would seriously damage not only ESB's viability but also the viability of existing and new-generation entrants."