Energising the legal market

Ryan Dunleavy reports on the implications of the European Union's decision to liberalise the Irish electricity market.

Lawyers are gearing up for an increase in Irish energy work after the partial liberalisation of the electricity market in the Republic of Ireland from February 2000.

The European Union is forcing the Irish government to sell off 28 per cent of the nationalised market because its monopoly contravenes EU competition laws. Further energy legislation will be introduced next year, including acts that will liberalise the gas market.

Southern Ireland's new energy market is likely to have a more international character. Northern Irish company Viridian, in conjunction with Southern Irish Cement Roadstone Holdings, has been granted planning permission for a 600 megawatt station in north Dublin and is planning smaller 60 megawatt power stations for Cork and Drogheda.

Finnish power supplier Imatrani Voima Oy is constructing a peat-fired station in the midlands. And two US energy companies, Arco and Marathon are considering setting up in Ireland. Arco plans to enter Ireland in partnership with Scottish Power and Ireland Power Group.

Mark Saunders, US firm Dewey Ballantine's head of energy in London, says: “Deregulation gives rise to new businesses competing in this market, which makes deals more complex. With that comes a lot of legal work. Any market that moves throws up new challenges.”

John Cronin, a partner in McCann FitzGerald's London office, agrees. He says: “Deregulation and energy in general will create a dramatic amount of work for lawyers over the next couple of years. We are trying to anticipate the legal problems there are going to be.”

A spokesman for Dublin law firm McCann FitzGerald says: “Although preparations, both legislative and practical, for the first phase of liberalisation have some way to go, it seems that there will be no shortage of prospective new market participants. This should increase pressure to meet next year's liberalisation deadline and augurs well for future competition in the market.”

Cronin says that gas will have to be liberalised soon after the deregulation of electricity. He says: “At the moment most of the gas in Ireland comes from Kinsale Gas, but its supply is running dry. Much of it is starting to come from Scotland already.”

The Electricity Supply Board – owned by the Southern Irish government – has been given planning permission for a gas station in Dublin. It will compete with private companies after deregulation of the markets.

The Irish gas board, Bord Gais Eireann, is also said to be looking at building a gas power station in Cork with Canadian Utilities.

Cronin says that other energy sectors will also open up: “The government is keen to promote alternative energy. It has not taken off to a huge extent but it will. The first power company to build a peat-fired station is doing so now.”

Lawyers are predicting that the creation of these new markets will lead to competition between Northern and Southern Ireland. Cronin says: “We are looking at Ireland as a single entity for the energy sector.

“Northern Ireland has already produced Strategy 2010, a report by a strategy review committee. It was a government nominated committee and it recommended an integrated energy policy for the island of Ireland.”

Michael Lynch, a partner at Elliott Duffy Garrett, says: “The peace process will make more cross-border cooperation between electricity and gas companies possible.”

Brendan Cahill, a commercial partner at William Fry, agrees.”It is likely the North and the South will compete. We see that as a trend in the future,” he says.

British and US firms are also hoping to gain work in the new market. Saunders says: “British and US lawyers are ready to take on the work as well. In any jurisdiction you need good domestic advice but British and US lawyers have considerable experience in energy from around the world.”

The liberalisation of the Irish energy sector will create a whole new market and with it new legal issues. But it will not only be Southern Irish lawyers who handle the work. The work's character will be international and so will many of its lawyers.