Commentary: More trouble to come on coal

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The Independent Online
The saga of the coal contracts needed to secure British Coal's future is far from over. There are hitches and hurdles that may yet mean trouble for the Government.

Whitehall has tried hard to stitch up a series of deals which force the generators, National Power and PowerGen, to buy enough coal to make British Coal privatisable while pressuring the regional electricity companies to buy the electricity generated from the coal.

In doing so they have made few friends in the privatised electricity industry. However close the Government is to securing agreement on the quantity and prices of both the coal and electricity, there are still problems that may not seem obvious to those outside the industry. Most regional electricity companies have agreed grudgingly to buy the coal- based electricity. But if one stalls, the proposed deal could fall apart.

The basic stumbling block is that the 12 regional electricity companies have already committed, to varying degrees, to buy electricity from independent gas- fired power stations and Nuclear Electric. Those less heavily committed to these other sources of electricity are being asked to take what they regard as more than their fair share of the power generated from coal.

The Government owns Nuclear Electric and can force some of those contracts to be abandoned. It can do so less easily where private gas-fired projects are concerned.

The problem is largely of Whitehall's own making. By encouraging the dash for gas as a way of promoting competition between generators, it created a huge problem for coal-fired power. Any deal is now likely to hide a mess that should bring a blush to any minister's face.

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