The move is likely to infuriate power companies, the electricity regulator and some of its own MPs. But the President of the Board of Trade, Margaret Beckett, will justify it on the grounds of Britain's need for a balanced energy policy.
The coal rescue package, expected to be announced on Thursday, will include a three to five-year moratorium on new gas-fired capacity, commitments by the three big generators, National Power, PowerGen and Eastern, to buy more British coal, and measures to make existing coal stations more environmentally friendly. The package will not include proposals to force the generators to divest a proportion of their coal-fired capacity, although this is likely to be an option kept under review.
Ministers imposed a moratorium on consents for any further gas-fired stations last Christmas and it had been widely expected that this would be extended for a three to five-year period. However, there are a number of gas-fired stations which have received section 36 planning consent and are waiting to go ahead. The Government is expected to refuse some of these stations what is known as section 14 consent - which allows them to burn gas - thus preventing construction from proceeding.
The rescue plan is designed to provide a power generation market for at least 25 million tonnes of coal a year. This will prevent the almost complete demise of the British mining industry but it will not stop a further round of pit closures involving up to five collieries and perhaps 3,000 jobs.
The current long-term contracts between RJB Mining, Britain's biggest coal producer, and the generators were extended for a three-month period from April to secure a temporary lifeline for the pits. But new arrangements need to be put in place by the end of this month.
Gas-fired power generators, led by Enron of the US, have warned the Government that blocking further gas-fired stations could add pounds 1bn a year to electricity bills and jeopardise thousands of jobs in the upstream gas industry and construction. The electricity regulator, Professor Stephen Littlechild, has also urged the Government not to extend the moratorium, arguing that it will stunt competition in the generating market. The Commons Trade and Industry Select Committee, which is chaired by the Labour backbencher Martin O'Neil, will also criticise the move in a report to be published this week.
But ministers are fearful that unless the "dash for gas" is halted then Britain could be dependent on gas for up to 80 per cent of its electricity generation by 2020.
"It is accepted within government that leaving the existing consent policy as it is will not help solve any of the problems," said one Whitehall source. "But the package that is being announced will still be consistent with the Government's general industrial policy which is pro-competition."
The aim of the moratorium will be to give coal a level playing field to prove itself as a competitive fuel.Reuse content