In May, Constantin Gurdgiev and I wrote a series of articles on the Irish energy sector and the malign role played by the ESB, the monopoly state electricity generator. Those in Sunday Tribune are not on line, but this version appeared in the Wall Street Journal.
DUBLIN -- Last month, the European Commission launched a bid to open up energy markets across the EU, with the aim to improve competitiveness and energy security. Yet when it comes to high prices, alleged abuses of monopoly power and dangerously overstretched electricity networks, perhaps no country faces bigger problems than Ireland. Without reform, the "Celtic tiger," as Ireland has been known during its continuing economic boom, could become a Celtic slug.
Businesses in Ireland are becoming increasingly concerned about rising business costs. According to 2005 figures from Eurostat, Ireland's electricity prices for industrial users are the highest in the EU: 34.1% above the EU-15 average and 57.2% above the U.K. rate. Electricity is 6.9% more expensive in Ireland than in Italy, the country with the second highest prices of the EU-15. "There are worries about whether we can keep the lights on," says David Manning, environment chief for the Irish Business and Employers Confederation. "That is a nonsensical situation."
For households, electricity prices jumped 41% from 2000 to mid-2005, according to Sustainable Energy Ireland, a state agency. That was the highest increase in the EU-15. Failures are increasingly likely: 57 warnings of power cuts were issued last year, more than double the 2004 figure of 27.
Lack of competition is the obvious culprit. The state-owned and regulated Electricity Supply Board (ESB) controls about 85% of Irish power generation. Once known for a strong ethos of public service, today's ESB is a cash cow for the unionized work force. The latest audited accounts for the ESB, from 2004, show the average pay package for employees totaled €71,700 a year. In 2005, the average industrial wage in Ireland was less than half that -- around €33,500. At one ESB power station in Dublin, workers took home a whopping €140,000 per year on average! And then there is the prospect of massive restructuring payouts, pensions and other benefits the government might hand out as it attempts to reform the industry.
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