On Thursday, the Government said it would seek opportunities for National Power and PowerGen to sell coal-fired stations to competitors to help increase competition. This has come out of a review of energy policy, which included the extension of restrictions on the construction of new gas-fired power stations until market reforms have established a "level playing field" for a diverse range of energy sources.
Pressure to sell coal-fired plant is also coming from the electricity regulator Stephen Littlechild, who last week said he may judge that the two largest coal-fired generators need to reduce their market share further to galvanise competition.
"We see no justification for further plant sales by National Power at this time, and have no plans for further divestment," the company said in response.
It said an additional 10,000 megawatts of gas-fired plant is under construction and that since 1991 its share of the electricity market has fallen to 21 per cent from 46 percent. During that time the number of generators has increased to 30 from three.
Since National Power was sold to investors in 1991, prices for large users have fallen by as much as 30 per cent below inflation, and by 15 per cent for small customers, the company said. In 1996 National Power and PowerGen agreed to lease 6,000 megawatts of coal-fired plant to Eastern Electricity. Refusal would have resulted in a referral to the Monopolies and Mergers Commission. Analysts say National Power may this time wish to take its chances with the MMC.
The shares rose 18 pence to 585p.
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