Power plan `could cost industry pounds 40m'

Scottish Hydro-Electric warned yesterday that it could cost the company up to pounds 40m if the Government goes ahead with plans to block further gas-fired power stations.

The company said that if ministers wanted to prevent the country from becoming over-dependent on one source of fuel for electricity generation, then a better solution must be found. One possibility, it said, would be to introduce fuel tradable "permit" system under which electricity suppliers would only be allowed to obtain a certain proportion of their power supplies from one fuel source. Roger Young, chief executive of Hydro- Electric, said the permit system would be a means of allowing a free market to operate while preventing one fuel from becoming dominant.

The Government is due to announce next week the results of its energy review, designed to safeguard the future of the coal industry.

One option ministers are studying is a ban on further gas-fired stations. Hydro-Electric already has planning consent to extend capacity at two gas-fired stations - Keadby in Runcorn and Seabank in Bristol - by a total of 1,100 megawatts. This would reduce the market for coal by 3 million tonnes, equivalent to the output of one large pit. The company has so far spent pounds 30m-pounds 40m on preparations to extend the two plants - investment that would be wasted if the moratorium on gas-fired generation was extended

Hydro-Electric's expansion south of the border helped it lift profits by 3 per cent to pounds 213m last year. Profits from its English generating interests rose 57 per cent last year to pounds 88m and now contribute a third more to group profits than the company's Scottish power stations. The contribution will grow further this year when the 750 megawatt Seabank station, built as a half-and-half joint venture with BG, comes on stream at Christmas.