Michael Heseltine, President of the Board of Trade, called on the electricity industry to avoid signing long-term coal contracts that would pre-empt the outcome of the Government's review of energy policy.
The review had been launched because of a widespread belief that there could be larger sales than those previously envisaged for British Coal, he said.
The company is in negotiation over a five-year coal deal with National Power and PowerGen under which coal sales would drop sharply from present levels. In a letter to all three parties, Mr Heseltine said: 'I am looking to all parties concerned to ensure that any contracts which may be agreed do not prejudice the outcome of the review.'
He said that some sort of new contract must be in place when the existing coal deal runs out at the end of March, but hinted that he would prefer a stopgap.
The contracts being discussed would reduce sales to the generators to 40 million tonnes next year from 65 million at present, dropping further to 30 million tonnes in the subsequent four years. The proposals prompted the announcement in October that British Coal would close 31 pits with the loss of 30,000 jobs and a further 4,000 by the end of 1998.
Neil Clarke, chairman of British Coal, has blamed the use of gas- fired and nuclear plant in electricity generation for the demise of British Coal. He said on Thursday that without direct intervention by the Government to change the market, all the job losses would have to go ahead.
Mr Clarke, who put a series of proposals to the Department of Trade and Industry, gave a cautious welcome to Mr Heseltine's comments. 'I deal in realities rather than in signals,' he said.
Mr Clarke said his proposals for market intervention could salvage a total of 8,000 jobs in 1993-94, although 2,000 of those would go over the following four years. But the jobs would be at the expense of employment in the nuclear industry. His plans also meant that the Government had to stem the 'dash for gas' in electricity generation and halt imports of power from France.
Electricity companies and others have told the Trade and Industry Select Committee that up to 20 million extra tonnes of coal could be sold every year. However, they also acknowledge that the Government would have to intervene in the market.
It is also expected that any saving of coal jobs would result in higher electricity prices. John Baker, the chief executive of National Power, told the select committee that the question that ministers had to answer was whether the domestic electricity consumer or the taxpayer would foot the bill.Reuse content