Secret deal saves coal industry

THE FUTURE of Britain's coal industry looks assured. Senior industry sources believe PowerGen and Eastern are close to signing long-term coal contracts with Richard Budge, head of RJB Mining, the company which operates most of Britain's deep-coal mines.

The announcement next week of new contracts with Britain's largest generators would suit Peter Mandelson perfectly, as he could be hailed as the saviour of the coal industry at Labour's conference in Blackpool, and prove New Labour has not lost touch with Old Labour.

Without new contracts, the core of the British mining industry would be doomed. Some 9,000 jobs at RJB Mining would go. Killing coal would be political suicide.

Mr Mandelson paved the way for new contracts last week when he announced a deal with PowerGen. The company has won permission from Mr Mandelson to buy East Midlands Electricity, a retail supplier, and become the largest integrated power company in Britain. In return, PowerGen has to sell two 2,000 megawatt coal-fired stations and accept lower "earn- out" payments from Eastern Group.

This last detail points to a secret deal. The "earn-out" payments relate to coal plants sold by PowerGen to Eastern. The market structure means the pounds 40m annual "earn-outs" Eastern has paid to PowerGen discourage Eastern from burning coal. Cutting these raises Eastern's incentive to burn coal and helps fund a project Eastern announced last week - a pounds 100m flue gas desulphurisation unit for its West Burton station, letting it burn coal more cleanly.

Senior industry figures believe a secret deal has been struck. One said: "Of course, officially, Mandelson is above wheeling and dealing. But behind the scenes, the minister is pressuring the three generators for coal contracts. We think Eastern and PowerGen may already have signed."

Mr Mandelson's deal will have come at a price. Professor Stephen Littlechild, the departing industry regulator, advised that PowerGen and National Power should each sell three large power stations or 6,000 megawatts of generating capacity. In his view, this would break the generators' stranglehold on the market and reduce prices. By letting PowerGen sell fewer power stations, Mr Mandelson has upped the generators' clout - and consumers may have to pay higher prices for electricity.

New contracts alone will not secure coal's future. The inherent market bias against coal will have to go. The dash for gas will have to be stopped to secure long-term demand for coal-fired stations - to be achieved by the Energy Review that Mandelson is due to publish within the next two weeks. With foreign gas set to account for 70 per cent of Britain's market by 2020, the review is set to argue that coal is strategically important.

Industry sources believe the moratorium on new gas-fired station permits will be extended for three years. As they take two years to build, that would guarantee coal a stable market for five years.

All three of the major power groups - National Power, PowerGen and Eastern - are expected to sign contracts with RJB Mining. A spokesman would not comment on new contracts, but said: "We await with interest the Energy Review, which has been conducted with great thoroughness."

Arts and Entertainment
TV Review: Sabotage, a meltdown and, of course, plenty of sauce
News
newsVideo for No campaign was meant to get women voting
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
i100'Geography can be tough'
PROMOTED VIDEO
Sport
Louis van Gaal looks dejected after Manchester United's 4-0 defeat by MK Dons on Tuesday night
sport
News
Actor, model and now record breaker: Jiff the Pomeranian
Video
News
REX/Eye Candy
science
News
i100
News
Down time: an employee of Google uses the slide to get to the canteen
scienceBosses are inventing surprising ways of making us work harder
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

£50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?