British Coal may close five more pits in 1994: Falling sales to electricity generators blamed for uncertain future of mines

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BRITISH COAL is expected to announce the closure of up to five more collieries in the new year because the amount of coal bought by National Power and PowerGen continues to fall.

The closures, which are likely to be announced at the end of next month, could mean the loss of 2,000 to 3,000 mineworkers' jobs.

Among the most threatened mines are Prince of Wales near Pontefract; Kiveton near Sheffield; Bilsthorpe, Newark and Point of Ayr in Clwyd. Of the 12 pits reprieved following the Government White Paper on the coal industry earlier this year, only these four remain in production.

British Coal has a further 18 core mines and it is now widely acknowledged that the future of these mines is no longer secure. One, Littleton in the Midlands, has already closed.

A spokesman for British Coal refused to comment on further pit closures but said: 'We will review the position in the new year.'

British Coal's latest figures, collated within the past few days, show that the mining workforce has shrunk to 15,000 from about 42,000 in October 1992.

Under the existing contracts with the generators, coal sales have fallen from 40 million tonnes to an annual 30 million tonnes. The price paid by the generators will also dip from the present pounds 36 a tonne, which is already 20 per cent lower than the price last year.

Although British Coal has improved productivity in the past few years, it has yet to match world coal prices. The contracts with the generators have built-in price reductions, with British Coal aiming to reach world price levels within a few years.

Neil Clarke, chairman of British Coal, has made it clear that he feels the market has been rigged against coal and in favour of nuclear power. State-owned Nuclear Electric, which receives a subsidy of around pounds 1bn a year from electricity consumers, now has 25 per cent of the electricity generating market in England and Wales.

According to the Coalfield Communities Campaign, the Government has given consent in recent months to enough new gas-fired stations to displace a further 10 million tonnes of coal a year.

British Coal has also failed to secure extra sales to the generators outside the contracts, as it was urged to do by the Government. Although National Power and PowerGen have not refused to buy extra coal, they are unlikely to do so because they already have about 30 million tonnes stockpiled.

The Government offered a subsidy to help British Coal achieve extra sales, but company sources complain that a subsidy does nothing to expand the market for coal and that ministers have not addressed the real problem.

British Coal's situation is made worse by its own 16 million tonne stockpile of coal, for which there is no buyer.

It is also understood that the generators are unwilling to make any commitments on sales as they face the uncertainty of a potential reference to the Monopolies and Mergers Commission in 1994. Offer, the electricity regulator, has been concerned about the generators' ability to influence wholesale electricity prices and is expected to make a decision in January on whether to send the companies to the MMC.

There is also a question mark over the future of the existing coal contracts in the event of an MMC referral. One electricity industry source said that it is likely that uncertainty over the contracts, caused by an MMC inquiry, would kill the Government's plans to privatise British Coal.

To avert an inquiry, Professor Stephen Littlechild, director general of Offer, the electricity industry regulator, wants assurances from National Power and PowerGen that they will sell power plants to help to create competition.

He has also asked for assurances that prices will be reasonable until proper competition emerges. At the same time, Professor Littlechild wants to be satisfied that falling coal prices are passed on to consumers in the form of lower electricity bills.

(Photograph omitted)