Energy reform attacked as gas ban stays

GOVERNMENT PLANS to reform the energy market came under attack yesterday after the Secretary of State for Trade and Industry, Peter Mandelson, confirmed that the ban on further gas-fired power stations would remain in place.

The reform will also involve the abolition of the electricity pool and its replacement by new trading arrangements coupled with disposals of coal-fired power stations by the big generators.

In a White Paper published yesterday, Mr Mandelson pledged that the gas moratorium would be "short-term, temporary and aimed specifically at protecting diversity and security of supply". He would not put a date on when it would be lifted.

Publication of the review paves the way for National Power, PowerGen and Eastern to sign new long-term supply deals with the country's biggest coal producer, RJB Mining.

Mr Mandelson said that without the moratorium, coal's share of the market would have shrunk from 30 per cent now to 10 per cent in 2003, leaving Britain dependent on more expensive gas-fired stations for up to 60 per cent of its electricity.

But he denied that the Government had guaranteed a market for coal, insisting that the industry's future lay in its own hands.

The gas ban will block the development of 36 projects involving 12,000 megawatts of capacity - enough to displace 30 million tonnes of coal.

Ralph Hodge, the chairman of Enron Europe, one of the world's biggest gas station developers, said: "Consumers, the economy and the environment will be the losers, with higher-than-needed electricity costs, significant job losses and much higher emissions of greenhouse gases."

The Confederation of British Industry also criticised the lack of any set timescale for lifting the gas ban. Friends of the Earth said that the White Paper "does not amount to a sustainable energy policy for the future".

But the Confederation of United Kingdom Coal Producers welcomed the energy review, saying it would level the playing field and mean lower prices. The Electricity Association also broadly supported the decision to introduce new competitive trading arrangements.

PowerGen has agreed to sell 4,000 megawatts of capacity, and National Power said it expected to be able to agree acceptable disposal terms. The regulator, Professor Stephen Littlechild, has recommended it sell 6,000 megawatts - equivalent to three big stations.

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