The Competition Authority has asked the Minister for Public Enterprise, Ms O'Rourke, whether the ESB should divest its stake in a new power station in Dublin.
Known as Synergen, the gas-fired plant at Ringsend is planned as the workhorse of the ESB's generation division, which is facing competition for the first time. It is a joint venture with Statoil, the Norwegian multi-national. But the State company's investment in a turbine for the £200 million (€254 million) plant was sanctioned by Ms O'Rourke only after it gave an undertaking to sell its interest in the project if "competition law makes it appropriate".
In a letter to Ms O'Rourke in recent weeks, the authority is believed to have asked whether that should happen. Synergen is also the subject of scrutiny by the competition directorate of the European Commission, which sought information on the structure of the Irish market from the ESB in June. The project is contentious because it received a connection to the National Grid before the market was partly liberalised last year.
Such connections are required to supply electricity to the market, but constraints on the system in Dublin mean only a limited number were available when the industry was opened.
Because independent power generation is crucial to opening the market, this limitation was perceived to be a barrier to entering the market.
However, the electricity regulator, Mr Tom Reeves, moved in recent weeks to facilitate independent projects in the system used to allocate such connections.
Still, the competition authority is understood to have said it had a "concern" that the ESB's participation in Synergen "might be an abuse of a dominant position".
Though empowered to take an action against the project, the authority said there was a reluctance to spend public resources on lengthy, detailed legal proceedings before exhausting what could be more effective avenues.
Citing the ESB's written undertaking to Ms O'Rourke in December 1999, the authority said divestiture would be a "swifter" and "more appropriate" route to opening the market.
Any direction to sell the stake would be strongly opposed by the ESB. Its chairman, Mr Tadhg O'Donoghue, has said it would "scream from high heaven" if asked to leave the project.
Those familiar with the situation said Ms O'Rourke sought the advice of Mr Reeves when she received the authority's letter.
In private correspondence with Mr Reeves last year, the European Commission described the plant's agreement to secure a connection with the National Grid before the partial liberalisation of the market as "a violation of European law".
The commission, which has said the structure of the market in the Republic is "not favourable to competition", is expected decide whether to sanction the joint
Independent electricity companies and the Organsiation for Economic Co-operation and Develop (OECD) have criticised the pace and structure of liberalisation in the market and the ESB's dominant role. But many observers believe the Government's refusal in June to sanction a large-scale investment by the ESB in Poland means there would a reluctance to force it to exit Synergen. Without the plant, the ESB has said it would be left using older plant to face competition from cost-effective generation operated by independent companies.
