In a report to be published today, Offer rules that the regional companies have done no wrong in signing up for long-term contracts to buy electricity from new gas-fired power stations. These plants, many of which include regional electricity companies as major investors, are one of the reasons behind British Coal's decision to close 31 deep mines with the loss of 30,000 jobs.
The Offer report will exacerbate a government dilemma concerning the future of the 31 mines. Conservative backbenchers are threatening rebellion if ministers do not act to save about half the collieries. However, without cutting back on gas-fired generation or on nuclear plants, ministers are unlikely to be able to save enough mines to satisfy the rebels. A White Paper on energy policy and coal originally expected this week has already been delayed.
The generators National Power and PowerGen are resisting pressure to buy more coal than they need because the future market is already crowded with nuclear power and gas.
Offer is also understood to be questioning whether the two generators are fully passing on the benefit of falling coal prices to regional companies and the consumers they supply.
Professor Stephen Littlechild, the director general of Offer, is likely to investigate the contracts between British Coal and the generators and those between the generators and the supply companies with a view to ensuring lower prices to benefit everyone.
Meanwhile supply companies are likely to be allowed to continue passing through any extra cost of expensive coal-fired generation to consumers in their monopoly markets.