Gas-fired power fuels competition
Wednesday 27 August 1997
Meanwhile, RJB Mining, the company which bought most of British Coal's deep mines at privatisation in 1994, said the European Commission had launched a full-scale investigation of the so-called "sweetheart" contracts between gas fired stations and regional electricity companies (RECs).
The EC had been considering a complaint by RJB made in April, which was submitted again in a revised form last month to Karel van Miert, the competition commissioner. "Our application has now been accepted for investigation by the Commission," said an RJB spokesman yesterday.
The dispute is over take-or-pay contracts signed by RECs to buy power from gas fired stations. The aim was to secure alternative energy sources to the two main privatised generators, National Power and PowerGen. The deals commit the RECs to buying the power or compensating the generating stations, many of which are joint venture companies.
RJB has claimed the prices paid for gas-fired power are much higher than for coal. The submission to the EC argued the cheapest gas generators charged 2.1p a kilowatt hour, compared with 1.6p for coal. "We've clearly got a raw deal," the spokesman said.
Professor Stephen Littlechild, the electricity regulator, has repeatedly refused to intervene in the contracts on the grounds that they promote competition in the energy market. However, RJB has complained that most gas-fired plants do not compete on price with National Power and PowerGen, because of the complexities of the wholesale electricity market, the Electricity Pool.
The plight of the coal industry has become more urgent with the flood of new applications to build gas-fired stations in the so-called dash for gas. The 20 outstanding applications with the Department of Trade and Industry, listed in a recent Parliamentary answer, together account for 7,300 megawatts of capacity, enough to displace at least five big coal generating stations.
Four of the power station applications were submitted since general election, in a further test of Labour's power policy. They include a large 880 megawatt plant at Anglesey for an independent company, Canatxx Energy Ventures and a 150MW station at Barking.
Five more applications were submitted in April, just before the election, by ScottishPower, National Power, Hydro-Electric and Eastern Group.
Despite repeated words of sympathy for the coal industry, Labour has dismayed RJB by approving three gas-fired power plants since 1 May. The biggest approval by John Battle, industry minister, was for British Petroleum's 1,200MW plant at Saltend near Hull.
Mr Battle has also declined RJB's request for a moratorium on gas-fired approvals until the outcome of a public enquiry into PowerGen's plan to convert another station at Gartcosh in Scotland from coal to gas.
Last week Mr Battle came under further pressure when RJB closed Asfordby, the new Leicestershire "super-pit", blaming geological problems. Some industry watchers have warned RJB could have to shut five of its 17 working deep mines when long-term coal contracts with the generators come up for renewal in April.
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