ESB needs to be broken up and privatised, OECD says
THE GOVERNMENT should break-up the ESB and reform the utility because connection fees are too high and time delays large, an international economic think-tank has warned.
The Paris-based Organisation for Economic Cooperation and Development said Ireland's enterprise sector was not as dynamic as in other countries and claimed there was scope to improve the business environment – including boosting competition in the energy sector.
It also claimed in its latest economic survey of Ireland that barriers to entrepreneurship were high, with license and permit regulations too restrictive due to high fees and excessive delays for planning permissions.
The global body called for ownership of the electricity transmission grid to be shifted from the ESB to the grid operator, Eirgrid.
And it said other elements of the commercial semi-state should be broken up and partially privatised.
"The incumbent Electricity Supply Board's connection fees and time delays remain large, and vertical integration in electricity and gas is too high," the report said.
"Ownership of the electricity transmission grid should be transferred from ESB to the grid operator, Eirgrid.
"ESB's generation business should also be separated into competing generating companies and partially privatised."
The comments come just months after competition chiefs in Brussels cleared the ESB to retain ownership of Ireland's power infrastructure – despite rules that say power generation and networks must be split.
In 2011, Communications Minister Pat Rabbitte reversed the previous government's proposals to break up the ESB by handing ownership of the power grid to Eirgrid, which is also state-owned.
Mr Rabbitte favoured allowing Eirgrid to operate the power grid, while allowing the ESB to own the infrastructure.
The body also called for the legal system to be reformed claiming enforcing contracts and registering property remain difficult for businesses due to legal and court fees, time delays and high insolvency proceedings costs.
The global body said that while Ireland offered an "environment auspicious to innovative firms", innovation was concentrated in multi-national companies, while domestic SMEs lagged behind.
"The Government has expanded the innovation system from a relatively low base during the past two decades," it said.
"More recently, it has decided to focus a large part of its research spending on 14 priority areas. Nonetheless, more could be done to promote innovation and entrepreneurship."
The body also said that there were too many agencies tasked with providing funding for innovation and science, which "hampers resource allocation".
"Gains would be achieved by consolidating funding into a drastically smaller number of agencies, with one group dealing with science and basic research and another with applied research and innovation."