A new energy company may shortly enter the Irish electricity market in advance of the market fully opening in February, it has emerged.

The company, Direct Independent Energy, has had discussions with the Commission for Energy Regulation (CER) for several months. However, the CER is not willing to provide details about the company.

From mid-February independent firms will be able to offer a service to domestic customers and small businesses. While most of the large electricity companies are reluctant to enter the domestic market, the energy regulator, Mr Tom Reeves, is anxious to see some competition in this sector.

Direct Independent Energy is an Irish-registered company with three directors: Mr Peter Corcoran, Mr Derek Handley and Mr James Ives. It is understood the company is studying options for entering the market, but major funding may be needed. When contacted by The Irish Times the company declined to comment. The new company may trade under the name i Energy.

The company has been in contact with the CER in recent weeks about the forthcoming auction of 400 megawatts of ESB power to independent suppliers. This process, known as the virtual independent power producer (VIPP) scheme, allows independent suppliers who do not own their own power stations to acquire a supply for one calendar year.

Several companies have contacted the CER about the auction. Many have offered comments on how to improve the competition. Companies which have made comments include Bord Gais, ESB Independent Energy, Viridian Energy Supply, Airtricity and Direct Independent Energy.

Entering the electricity market can be very costly. Companies are required to provide security cover in order to enter the VIPP process.

Several high profile business figures have tried to enter the market before and been forced to abandon their plans. The most high profile was Mr Denis O'Brien, a major shareholder in E Power.

The Competition Authority and other observers have long drawn attention to the dominance of the ESB in the market. However two companies, Tynagh Energy and Aughinish Alumina, are building two power stations in an attempt to address a chronic shortage of electricity.

This week Mr Reeves also warned that new carbon emissions limits could also make it difficult to attract new entrants into the market.