The latest sanctioned increase in electricity prices has been condemned by a number of business representative groups, many of whom have questioned the effectiveness of competition in the energy sector

The 3.5 per cent increase in electricity prices, sanctioned this week by the energy regulator, Mr Tom Reeves, comes in the wake of a 9 per cent increase approved by him in September.

The business and employers' organisation, IBEC, said it was concerned that the model of liberalisation in the Irish energy market was not working.

"Meanwhile, prices continue to rise at unprecedented levels, with consequential impacts on the consumer price index, competitiveness and employment."

It said the latest increase will continue to widen the gap in terms of cost competitiveness between Ireland and elsewhere.

The Chambers of Commerce of Ireland, in criticising the increase, called on Mr Reeves to explain why he acted against research from his own office which, the organisation said, showed that commercial and industrial general purpose users are already paying more than their fair share for electricity.

ISME, the organisation representing small and medium-sized firms, said the latest rise would result in many small businesses closing or looking for alternative venues in cheaper locations to run their business.

"It is unbelievable in the extreme that in the four years since the electricity market has been open to regulation, the cost of electricity for small businesses has increased by 45 per cent," said Mr Mark Fielding, chief executive of the organisation.

"In general economic principles competition equates to price reductions, however in Ireland the opposite applies."

Mr Pat Delaney, director of the Small Firms Association, said this latest price increase would undermine the ability of Irish manufacturing and production industries to remain here.