BUSINESSES AND consumers are paying too much for electricity because there are too many ageing and inefficient power plants operating in the State, one of the two biggest State energy companies said yesterday.

Bord Gáis Éireann chief executive John Mullins said the rules governing the Irish electricity market were encouraging operators to keep older, less efficient and more expensive generating plants going. This in turn was pushing up the prices paid by consumers and businesses.

Mr Mullins also confirmed that the number of customers in arrears with gas bills is 40 times larger than it was a year ago. He said the company was trying to work out repayment options with such customers.

He estimated that about 16,000 of its 600,000 household natural gas customers were more than 120 days in arrears with their bills. He said that over half of them could be described as middle class, and were mainly people who were already having difficulty meeting mortgage repayments.

Under the single market system that has been operating for three years, energy companies are paid both for the electricity that they produce, and for keeping their generating plants “available” to produce power even when it is not required.

The availability payments were introduced to act as an incentive to new entrants to invest in new facilities at a time when there were fears for future security of electricity supplies. However, Bord Gáis argues they have also acted as an incentive to companies to keep older plants open, even though the market is theoretically supposed to favour more efficient and cheaper generators.

Mr Mullins said yesterday that closing or retiring these plants would “cut electricity prices”. Market rules needed to be changed to favour more efficient facilities.

He suggested that such a move could compensate for the public service charge that will see a total of €150 million a year added to the Republic’s electricity bill from the beginning of next month. Bord Gáis intends raising the issue with the State’s Commission for Energy Regulation and the Oireachtas.

The company is in the final stages of commissioning a €400 million gas-fired plant at Whitegate in Cork Harbour. Work began on the facility, which has the capacity to supply up to 450,000 homes with electricity, in 2007 and was finished on schedule and within budget, according to Bord Gáis managing director of assets Dave Kirwan. It will be ready to begin supplying power to the national grid next November.

The plant uses state-of-the-art gas and steam turbines designed and installed by US giant General Electric. It is one of the most efficient on the island. It has the capacity to produce a total of 450 megawatts of electricity.