Government to blame for ESB rises, says IBEC

ELECTRICITY prices would fall by almost 10% if the Government stopped demanding massive dividends from the ESB.

Employers' group IBEC says the Government must shoulder the cost of the rise in electricity rather than pass on price increases to users.

IBEC says that every €20 million taken by the Government in dividends from the ESB means a 1% price rise for electricity customers.

The group's enterprise director, Brendan Butler, said since 2002, the Government has received €184m in dividends from the ESB.

If the Government had foregone the dividends, it would have meant a 9% reduction in prices.

Electricity prices have risen every year since 2002 due to higher fuel prices and the cost of upgrading the ESB network.

Mr Butler said the Government should have done more to fund the upgrade directly rather than passing the cost on to business and consumers.

"Twenty-five years of Government underinvestment, combined with rapidly increasing commodity prices, has led to unsustainable electricity costs that are eroding the international competitiveness of Irish business," Mr Butler said.

He added that electricity charges for business users were now significantly above the average in Britain (Irish charges were lower than Britain in 2000) and also above the EU average, hurting the competitiveness of businesses.

IBEC also hit out at the industry watchdog, the Commission for Energy Regulation (CER), accusing it of failing to entice competition to the market. Mr Butler added that many firms were facing electricity cost increases higher than what has been approved by the CER.

"Actual increases experienced by large energy users are considerably higher than the annual averages announced by the CER. Recently the CER announced an 8% increase for large energy users to come into effect on January 1, 2006.

"The reality is that most large energy users will face increases of between 12% and 20%."

Mr Butler says the Government should fund the ESB's planned future investment in the electricity network and reinvest the 184m it has taken out in dividends over the past three years.

"The Government and the CER must work together with a cohesive policy that will bring energy costs back in line with our competitors. Action and leadership is needed now," he said.

The ESB has recently called for a revamp of its of finances, urging the Government to let go its tight grip on the company to allow it seek private investment.

Chief executive Padraig McManus said the company could not continue to fund its expansion abroad and upgrade the Irish electricity network indefinitely by borrowing from banks.

The Government has hired consultants Deloitte & Touche to review the energy market but has ruled out full privatisation of ESB.