Lower electricity prices are promised with the entry of Bord Gáis into the residential market.

It says its prices will be 10 to 14% lower than those charged by the ESB, over the next 12 months.

However, Fine Gael claims prices would drop by 25% if the ESB was allowed to compete.

Bord Gais has launched an aggressive bid for ESB customers and has guaranteed that its prices will be 10% lower over the next year, and lower still if customers are existing gas customers.

This will apply to the first year, ESB prices will be undercut by 5% for the subsequent two years.

Bord Gáis hopes to expand its customer base to more than 1m people in three years and says there will also be no penalty if a customer wants to switch back to the ESB.

The Government says its good news for consumers but will also protect jobs.

The ESB said it welcomed competition, but pointed out that its prices are set by the Commission for Energy Regulation. It is not allowed to discount from that rate.

The announcement amounts to a huge shake-up of the residential electricity market and, according to Bord Gáis, will result in immediate and substantial savings for customers.

In a statement, the ESB said the residential market has been open to competition since February 2005 and it was open to all competitors to charge what they like.