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Freeze on gas power may put pounds 5bn on bills

THE Government has been warned that imposing a five-year freeze on any further gas-fired power stations could cost consumers pounds 5bn in higher electricity bills, halt pounds 3bn worth of construction projects and threaten 300,000 jobs in the gas industry.

The warning comes as ministers finalise plans to extend the moratorium on gas-fired stations to help bale out the coal industry and provide it with a secure share of the electricity generating market.

The Cabinet sub-committee conducting the energy review met last week and is thought to have endorsed plans to extend the moratorium introduced just before Christmas. "No definitive decisions have been taken yet but the moratorium is one of the big options right up there," said one Whitehall insider. "Everyone agrees something should be done for coal."

Enron, the US power company that has built two gas-fired stations in the UK and has plans to build a further two, has been lobbying ministers hard not to extend the moratorium.

The Commons Trade and Industry Select Committee and the electricity regulator, Professor Stephen Littlechild, have urged the Government to lift the moratorium. But ministers disagree, seeing it as a way of ensuring diversity of supply and preventing the electricity market from becoming over-reliant on gas.

Enron claims, however, that the generating market will only become more competitive and prices will only fall if more new entrants are allowed in.

It says lack of competition to the big three fossil-fuel generators, National Power, PowerGen and Eastern, is costing consumers pounds 1bn a year by allowing prices to remain too high.

Ralph Hodge, the chairman of Enron Europe, also says that imposing a moratorium on gas-fired stations would not help the coal industry for two years given the number of projects which are already being built or have approval.

He argues that a better way to provide a bigger market for coal would be to oblige the generators to make mothballed coal-fired plants available to other operators. Enough coal-fired plant is mothballed to provide a market for up to 3 million tonnes of coal a year - the output of at least one large pit.

Enron also says that 300,000 people are employed directly and indirectly in the gas industry upstream and downstream and some of these jobs will be lost if the gas is discriminated against in favour of coal.

Attempts to find a long-term solution for coal that will guarantee it a market for about 25 tonnes a year - enough to supply a fifth of Britain's electricity - are being led by the Paymaster General, Geoffrey Robinson. But the President of the Board of Trade, Margaret Beckett and her Energy Minister John Battle, are thought to favour a moratorium on gas of three to five years.