The energy regulator Tom Reeves is considering terminating a major incentive scheme that allows electricity companies to sell excess power late at night for a significant profit.

While the practice is not illegal, Mr Reeves claims it is having undesirable implications for the market. At present even energy not needed late at night qualifies for what is known as a "spill payment" or a guaranteed price of €28 per megawatt hour. It also qualifies for another related payment of €5.94 per megawatt hour.

Electricity demand is traditionally very low between the hours of midnight and 8am, but in a new document Mr Reeves points out that energy companies are still producing excess electricity during this period and are able to avail of the two "spill payments".

He claims that during this period of minimum demand, energy companies are taking advantage of the guaranteed price.

He says he believes "these mechanisms as currently operating are having undesirable implications for the market, in the form of artificial arbitrage opportunities and inefficient generation dispatch".

Mr Reeves, who heads up the Commission for Energy Regulation, estimates that 45 per cent of excess power (known as "spilled energy") is now produced during the night.

In a document produced by his office in recent days, he states: "It is attractive to spill energy at night." He also draws attention to the practice of some electricity companies exporting energy from Northern Ireland into the Republic where the spill price is higher.

He says this could have implications for setting up the new single electricity market for Ireland.

Mr Reeves is now asking the energy industry whether the current regime of a guaranteed spill price should continue in its present form.

"The commission has a duty to protect the interests of final customers. An additional revenue stream has been provided for market players through the spill floor price," he states. In his document he asks whether there should continue to be "a spill floor price".

He adds that if the current guaranteed price was not in place the value of the energy produced at night would be "close to or at zero". This leads him to the view that "spill at night may therefore be displacing less expensive sources of generation".

The industry has been invited to make comments on the issues raised and must reply by May 13th.

None of the electricity companies wished to make a comment last night, although most indicated their strong opposition to any plans to end the guaranteed spill floor price. One commented that spill payments were a normal part of balancing supply across the system.