British Coal sell-off may be cancelled

THE Government may abandon plans to privatise British Coal as a result of its review of energy policy.

Other options being considered in the review, triggered by the outcry over plans to close 31 mines with the loss of 30,000 jobs, include subsidies for British Coal and the introduction of legislation forcing National Power and PowerGen to buy more coal.

The pounds 1.3bn subsidy for nuclear power is also being questioned as part of the Department of Trade and Industry review. The first progress report on the review, published yesterday, coincided with a decision by the electricity watchdog, Offer, to reduce the levy on electricity bills, which subsidises Nuclear Electric, from 11 to 10 per cent. The move will save the average household pounds 3 next year.

The Government's list of options also puts in question the future of the Sizewell B nuclear reactor under construction in Suffolk and of the ageing Magnox reactors. Both belong to Nuclear Electric, which accounts for 22 per cent of electricity generated in England and Wales.

A spokesman for the DTI said: 'Nothing is decided. It is all completely wide open now.' The list reveals that the department is considering ways of stemming coal imports and increasing exports by British Coal. The DTI's review team will also examine the role of imports of electricity from France and Scotland and could recommend a ban on any more gas-fired generating plants.

Although abandoning wholesale privatisation of British Coal is a possibility, the Government is also looking at the potential for sales of specific pits to the private sector. It seems likely that legislation will be brought in to change working practices in the coal industry, some of which date back almost to the beginning of the century.

Michael Heseltine, President of the Board of Trade, said that none of the options should be considered more favoured than others at this stage. But he added that the whole exercise was based on a widespread belief that British Coal sales could be much higher than envisaged at present.

Current contracts under negotiation with National Power and PowerGen would mean a fall in sales to 40 million tonnes next year from 65 million tonnes in 1992/93, and a subsequent fall to 30 million tonnes a year for the following four years.

Mr Heseltine said the review would include an examination of the workings of the electricity industry since privatisation and of whether any company was guilty of abusing its market power.

In a letter to Richard Caborn, the chairman of the Trade and Industry select committee, he said that some of the solutions under consideration would be subject to restraint by the European Commission and by the General Agreement on Tariffs and Trade. He asked the House of Commons select committee carrying out a separate energy review to suggest any relevant areas not covered by the DTI's work.

Meanwhile, Antonio Cardoso e Cunha, the European energy commissioner, called yesterday for a free market in energy and a continued move away from subsidies. He said that, under present European Community regulations, state aid for coal production in Britain was ruled out by the size of the nuclear levy because aid was allowed for only 20 per cent of primary energy production in any member state.

Mr Cardoso e Cunha said: 'Subsidy for coal is a matter for the British government. They have chosen to support nuclear power. You have heard of subsidiarity.'

Earlier, speaking before the select committee, he said that he had been personally surprised and dispappointed at the decision to close 31 deep mines. But he added: 'Although I am concerned I am limited in my ability to act.'

He said that there was no legal basis for allowing transport subsidies for British Coal to export into the rest of Europe, an idea strongly backed by trade unions.

He also warned that while the Commission was concerned about security of fuel supply, expensive reserves should not be kept open unnecessarily.