Bid to outlaw gas power deals

Coal producers’ anti-competition complaint is being considered by the European Commission

Several gas-fired power generators in the UK could face bankruptcy if the European Commission determines that their contracts with electricity distribution companies are anti-competitive.

The commission’s Competition Directorate (DG4) is bound to consider the issue following a complaint by Britain’s coal producers last month that the long-term contracts between gas-fired generators and distributors breached European law by discriminating against cheaper coal-fired generation.

`We want them declared unlawful and void for infringing Article 85 of the Treaty of Rome,’ said a spokesman for RJB Mining, which lodged the complaint jointly with the Confederation of UK Coal Producers.

They say that coal’s share of the UK generation market has fallen from 60% in 1989 to 17% and could disappear by 1998.

The complaint identifies several gas-fired plants which it alleges are less economic than existing coal-fired units. The RJB spokesman said the latter’s unit cost of generation was 1.6-1.8p per kW/hour against the 3p per kW/hour that distributors were paying to gas-fired generators.

But the gas-fired generators and some industry analysts do not believe the coal producers have a convincing case. They point to the fact that the electricity regulator, Offer, examined the contracts in 1992-93 and decided they met the `economic purchasing’ requirements of the Electricity Act.

Professor Stephen Littlechild, the head of Offer, also told the companies that he would not conduct any retrospective reviews of the contracts.

A spokesman for Keadby Power, which operates a 680MW gas-turbine plant in Yorkshire, said the complaint was probably intended to raise the stakes in the negotiations the coal producers were holding with generators about supply contracts after March next year.

DG4 will make an initial assessment of the complaint within about a month. If it decides to go ahead with an investigation, it will be at least a year before it drafts a decision for the commission to adopt.