British Coal deal reached

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The Independent Online
THE GOVERNMENT is poised to announce a series of contracts that will secure the future of British Coal, but in a much reduced form. The agreement will mean the closure of dozens of pits and the loss of thousands of miners' jobs, but will pave the way for the rapid privatisation of British Coal.

Under pressure from Whitehall, all but one of the regional electricity companies have agreed to five-year arrangements allowing British Coal to sell initially 40 million tonnes for electricity generation, falling to an annual 30 million tonnes after the first year. This compares with 65 million tonnes today. Existing government-imposed contracts expire next spring.

Although British Coal will sell under contracts to National Power and PowerGen, the deal required the regional companies to agree to buy the electricity generated from the relatively expensive UK coal.

It is understood that at least one regional company is to drop existing low-cost contracts with the state-owned Nuclear Electric to buy more coal-based power. This is again due to pressure from the Department of Trade and Industry, which has been strongly urging companies to allow a deal to be concluded before the Conservative party conference early next month.

The generators will sell electricity to the regional companies at an initial 3.26p per unit compared with 3.6p under typical contracts now. The price will drop over five years and is supposed to benefit consumers by slightly lowering household electricity bills.