Closure of an Offaly power station would have "severe implications" for Bord na Móna, the peat company warned yesterday. It is understood the ESB board will decide this week whether to reopen the plant, located at Rhode.

The power station has not produced electricity since last May, when a staff member was seriously injured in an explosion.

The decision is particularly sensitive for the ESB on two fronts. Apart from a potential clash with another State-owned company, it is known that about 100 staff have manned the plant on full wages since last May, even though no electricity or income was produced.

Closure would displease Bord na Móna, which expected to supply the plant until the end of 2003. Its spokeswoman said additional investment in the power station was a decision for the ESB.

But she added: "Bord na Móna had anticipated that the Rhode power station would continue in operation until 2004 and is staffed and resourced accordingly. Any alteration to that operating schedule would have severe implications for the company."

Still, the ESB is anxious to avoid a repeat of the Rhode situation at a sister station in Ferbane, which was fully staffed but produced no electricity in the two years prior to its closure last December. The ESB is understood to have lost €8.89 million (£7 million) in keeping the plant open.

Large losses have already been sustained at Rhode itself. The ESB is thought likely to lose even more money if it invests the €3.8 million required to reconstruct the power station.

Such a programme could take 12 months to complete, leaving less than a year of electricity production before the plant closes definitively at the end of next year. The ESB is obliged to close Rhode before 2004 under the terms of an agreement in 2000 linked to the liberalisation process in the electricity market.

This - and the closure of five other peat-fired power stations - was required to secure European Commission support for two new peat-fired stations at Lanesborough, Co Longford, and Shannonbridge, Co Offaly. Such power stations are less efficient than gas-fired plants and are viable only if the ESB sells the electricity at special "public obligation" tariffs which must be sanctioned by the EU.

Even if Rhode is reopened, the plant's old age and relative inefficiency means it would be used only at times of high demand for electricity. Yet failure to reopen the power station could see a repeat of the Ferbane situation, which was regarded as embarrassing for the ESB. Chairman Mr Tadgh O'Donoghue has said the firm was not proud of the situation.

It is understood the ESB received a Health & Safety Authority (HSA) report on the accident last month. A HSA spokeswoman said she could not release the study as it was "confidential". When it was pointed out that the report could contain findings of legitimate public interest in respect of a State-owned firm, she said the HSA never published such studies.