Coal contract pressure increases

PRESSURE on the electricity industry to sign future contracts with British Coal will increase this week as the Government pushes to announce an agreement before the parliamentary recess on Thursday.

The reluctance of some electricity companies to sign five-year contracts at the Government's behest means that the planned privatisation of British Coal, scheduled for next year, could be delayed.

The success of the sale depends on new contracts with the generators, National Power and PowerGen, which buy most of British Coal's output. The generators will not sign unless the regional electricity companies sign parallel contracts to buy electricity generated from the coal.

National Power last week offered the regional companies 2.78p a unit over five years, compared with about 3.1p in current contracts. The price is still considerably more than some of the regional companies will pay.

A source in National Power said that the company feels it has gone as far as possible without unacceptable damage to profits.

The generators are willing to take a total of 45m tonnes of coal next year, tapering off to 25m tonnes over five years, compared with 65m tonnes currently.