ESB claims that the commercial user subsidises the retail consumer may only be substantiated when an EU directive on liberalising the electricity market is fully implemented, an Oireachtas committee has been told.

EU draft legislation provides for retail electricity tariffs to be regulated by the Commission for Electricity Regulation, the head of the commission, Mr Tom Reeves, said yesterday.

"There have been claims that the commercial enterprises and small businesses are subsidising the domestic market. It may be high but it may be cost reflective. When this legislation is passed, we'll see if that's true," said Mr Reeves.

He was addressing the joint Oireachtas Committee on Public Enterprise and Transport.

The draft legislation also provides for the establishment of Eirgrid as a transmission system operator, for the ESB to own, construct and maintain the transmission assets and for the establishment of a distribution system operator.

The transmission system operator is currently part of the ESB national grid business unit, which is managerially independent from the rest of ESB.

"It is important that the transmission system operator be independent of the parties so that it has no incentive of any kind whatsoever to discriminate in any way between generators," Mr Reeves said.

Mr Reeves said there are a number of other issues to be considered in the future, among which are public service obligations, the proposed infrastructural agreement between Eirgrid and ESB, a "vesting agreement" between ESB generation and its public electricity supply arm.

"The Minister has also announced a further opening of the market to 40 per cent in 2002 and to 100 per cent in 2005," said Mr Reeves.