The EU's proposed shake up of energy markets will not force the Government to break up the ESB as it was planning to do.

Last March, the Government published a White Paper on the electricity market that proposed splitting the ESB's generating business from the national grid, a key part of the system that distributes power to customers.

The proposal met with opposition from the unions representing a vast majority of the State company's 6,000-plus workers and caused disquiet among management.

However, if the proposals announced yesterday by the president of the European Commission, Jose-Manuel Barroso become law, they will leave the Government with the option of keeping the ESB intact and maintaining the status quo.

While the ESB owns the national grid, it is managed by an independent State agency, Eirgrid. The EU will allow member states to apply this system if they wish, though it says its primary aim is to split the generation and distribution arms of the union's power companies.

A spokesman for the ESB yesterday said it welcomed the EU proposals and would study them before making any comment. He pointed out that the EU also wanted to promote the sale and distribution of electricity across borders between member states, and added that the ESB was already taking steps in this direction through its involvement in cross-border interconnectors.

However, it is understood that ESB management favours keeping the power generation and distribution arms in the State company's ownership, while leaving the national grid's management to Eirgrid.

Last April, its board said it was concerned about the possible impact that the proposed break up could have on the ESB's value and commercial viability.

The ESB's rivals, who supply their electricity to industry and business, favour its break-up because they depend on the national grid to reach their customers. They claim that allowing the ESB to own the distribution system creates a conflict of interest.

Airtricity executive Mark Ennis told The Irish Times last night that a full break-up of the ESB would deliver benefits for consumers in the shape of enhanced competition.

In recent talks with the Government, the company's unions said they did not believe that the EU would demand that the ESB be broken up.