The board of EirGrid, the national grid company, is facing legal action by the electricity regulator after it refused to implement a direction formalising its separation from the ESB. Such a case would be the first High Court action taken by regulator Mr Tom Reeves since the electricity business was deregulated last year.

The dispute centres on a direction which gives EirGrid control over long-term planning of the electricity network but gives the ESB control over "detailed planning". ESB owns the network but EirGrid controls the flow of power through it to ensure fair competition to independent producers of electricity.

EirGrid said in a statement yesterday that it could not comply with the direction, claiming it was not in accordance with the EU law. This puts it on a collision course with Mr Reeves, who set a deadline of Wednesday for compliance with the direction. He is understood to have warned EirGrid that he would seek a High Court order for the direction to be carried out if the deadline passed. The regulator's spokesman confirmed yesterday that EirGrid had written to his office. He declined to comment when asked whether legal action would now be taken. EirGrid said it was acting in the firm's best interests and electricity customers in particular. It added: "[The board] considers it is essential to take a long-term perspective and is not prepared to be exposed to possible liabilities that may flow as a consequence of accepting the current direction."

The Minister for Public Enterprise, Ms O'Rourke, is understood to have told EirGrid it should adopt the direction. The regulator's intervention follows EirGrid's failure to agree on the structure of its separation from the ESB after more than six months of talks earlier this year.