The Electricity Regulator's 5 per cent cap on cheap top-up power supplies to the independent sector will remain in place pending a full legal inquiry, the High Court decided yesterday.

Epower, one of the private companies new to the electricity supply market, asked the court to order continuation of supplies by the ESB to all of the private sector's power needs until the conclusion of Epower's challenge to the regulator's decision.

Counsel for Epower, Mr Paul Sreenan SC, told Mr Justice Murphy that he would be seeking to appeal his decision in the Supreme Court at the earliest opportunity.

The court heard that the EU directed the break-up of the ESB's monopoly on power generation and supply. It also favoured competition in the market - which was done with the introduction of the Electricity Regulation Act one year ago.

The market had been partially liberalised on February 19th last and the Minister for Public Enterprise indicated that full liberalisation would occur by 2005.

Mr Richard Nesbitt SC, for Mr Tom Reeves, sole commissioner responsible for regulating the introduction of competition to the market, said a system of trading in electricity had been established until the independent sector could build its own power generating stations.

The new Act allowed private firms to supply electricity even when they were not generating any power themselves. In order to do so the ESB was obliged to provide the independent sector with wholesale cut-price power.

Mr Reeves had put a limit on private sector power supply of 5 per cent of its total supply contracts - at a reduced tariff from the ESB - and had directed that above that 5 per cent they would pay the ESB at an economic rate.

Epower contended this would cause significant commercial losses which the company could not sustain on an ongoing basis.

Mr Mel Christle SC, counsel for the ESB, told the court the ordinary electricity consumer faced a £40 million-a-year rise in electricity charges to subsidise private companies setting up as independent power suppliers. Mr Christle said the low tariff rate was 16 per cent less than the actual cost to the board of producing electricity.

The decision was welcomed by the ESB, which said in a statement that it protected the position of small and medium-sized business customers.