Mr Haughey has told friends he intends to run for Fianna Fail in the newly formed constituency -- news that has alarmed several senior party figures.
The former minister, who lost his seat in the last general election, has already been appointed an area representative by party bosses. The move will pit him against Ms Power.
However the news has unnerved several senior party figures who are now anticipating a bitter internal battle between Mr Haughey and the high-profile senator.
There is a growing unease among party members that a cohort of former politicians will use the wave of support for Fianna Fail to make a return to politics.
Party leader Micheal Martin is facing a major headache in the coming months as several former TDs line up a return.
Senior Fianna Fail sources now fear younger politicians will be "squeezed out" if the party allows constituencies to be contested by ex-TDs.
But Dublin Bay North has been flagged by party bosses as potentially the most divisive internal contest -- as Ms Power resists the challenge from Mr Haughey.
Both Mr Haughey and Ms Power were unavailable for comment.