People living in rural areas will have to pay more for electricity than their urban counterparts if one of the OECD's recommendations is accepted.

The Paris-based organisation recommends that energy tariff structures should be "cost-reflective" and that consideration should be given to "eliminating the requirement that tariffs be geographically uniform in light of the non-uniformity of cost of supply".

The organisation recommends that the ESB should be prohibited, in the short and medium term, from adding to its generating plant. "In the longer term, if effective competition develops, then remove this limit on ESB so that all generators can compete across the entire market."

It also recommends that the ESB be required to divest of some generation plant if market prices to customers are not at competitive levels after the generation fuelled by the existing gas capacity comes on line, and if the amount of entry then expected and import capacity are together insufficient for effective competition.

A spokesman for the ESB said the company noted the report and the OECD's finding that electricity prices in the Republic are low by European standards.

Responding to the recommendation that the ESB not be allowed add to its generating plant, the spokesman said the ESB is "voluntarily" reducing its share of the market by 40 per cent, as part of the liberalisation process. In that context the OECD recommendation was not an issue, he said.

On the question of divestiture the spokesman said the sale of ESB generation assets to independent power producers "clearly would not, of itself, increase overall generating capacity.

"It is not logical to suggest that, in any short term, such a move would stimulate the entry of new, additional generators providing further capacity. On the contrary, if existing assets were available to such investors they are more likely to shelf plans they might have for new capacity."