Pits rescue plan would cost pounds 500m: MPs propose cut in nuclear subsidy, curbs on gas-fired power stations and a levy on imported energy

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THE Commons Trade and Industry Select Committee has called for cuts in the massive subsidy paid to the nuclear industry and an effective halt to further gas-fired power stations.

The recommendations are part of a pounds 500m package of measures aimed at saving some of the 31 deep coal mines earmarked for closure by British Coal.

In an influential report, the committee also expresses concern that the nuclear subsidy - which costs electricity customers more than pounds 1bn a year, is being used to pay for Sizewell B and to maintain ageing Magnox reactors.

The report shows that of pounds 2.26bn received by state-owned Nuclear Electric over the last two years, less than 1 per cent was used for decommissioning nuclear plant. The committee says the levy should be cut and be taken away from Nuclear Electric to make sure that it is used for the intended purpose and does not subsidise its current operations.

The report also says that Nuclear Electric should be relieved of almost pounds 10bn in historic liabilities related to decommissioning and waste management, which the company inherited from the Central Electricity Generating Board. Both the levy and the liabilities could be placed in a trust fund.

The report was welcomed by Nuclear Electric, which resents the liabilities it was forced to take on. John Collier, the chairman of Nuclear Electric, said: 'We are happy with that.' However, the committee's failure to demand closure of nuclear power stations was attacked by the National Union of Mineworkers as 'incredible'. Arthur Scargill, the NUM's president, said the committee had failed to address the problem that the market is rigged against coal.

In a bid to stem the dash for gas, the committee has urged the Government to give 'careful consideration' to plans for any further gas-fired plant. However this would allow about 8.6 gigawatts of plant already underway to go ahead. The committee estimates that gas could replace 30 million tonnes of coal by 1995-96.

The committee says gas should be forced to compete more openly in the market with coal. Almost all the projects underway are protected by 15-year contracts which ensure a buyer for the electricity generated irrespective of the cost

The recommendations on gas angered the unions, which say they do not go far enough. However, the UK Offshore Operators Association has said that if no more gas plants are allowed, 5,000 jobs offshore and a further 50,000 onshore are under threat.

The report stops short of asking the Government to ban electricty imports from France, which displace around 6 million tonnes of coal a year. But it says imports must be subject to the nuclear levy and should be allowed only if British electricity has free access to the market in France.

This could prove embarrassing for the Government, which is thought to be liable for millions of pounds in compensation if it interferes with the working of the link.

Coal imports are the main target of the proposals. The committee has called for a subsidy of pounds 500m over five years to allow National Power and PowerGen, the two generators, to buy 16 million extra tons of British Coal output at the expense of foreign coal. The subsidy is also aimed at enabling British Coal to sell an extra three million tons to other industries, though the company is understood to be sceptical of this.

Under current plans, sales to the generators are set to fall from 65 million tons at present to 40 million tons in 1993-94 and to 30 million tons by 1998. The committee envisages a drop in opencast coal to 10 million tons from 19 million tons today in order to save the market for deep mines. British Coal welcomed the proposals to reserve a larger part of the electricity market for coal, but one insider attacked the proposals on opencast mines as 'displacing coal with coal'.

Neil Clarke, British Coal's chairman, said: 'Opencast mines are a low-cost energy source and an enforced cutback would raise the average cost of the coal.'

The report assumes that the electricity generated from the extra coal can be sold to the regional electricity companies. It stipulates that consumers should not bear any extra cost and has called on the electricity watchdog, Offer, to keep a tight control on the prices charged by both the generators and the regional companies.

Offer, which has already questioned whether National Power and PowerGen charge too much for coal-fired power, is also being asked to speed up its review of the charges set by the regional supply companies for distributing power.

Other recommendations include government subsidies for sulphur-scrubbing equipment for coal-fired power stations. The committee also believes that the Government should set up an Energy Commission to increase scrutiny and public awareness of energy issues in the UK.

The report, which is less controversial in its proposals than many expected, will be fed into the government review of energy policy. The Department of Trade and Industry plans to publish a White Paper on energy within the next few weeks.