Eastern Group seeks partial switch to gas

Eastern Group, the UK's fourth largest electricity generator, has applied to the government to convert two of its coal-fired power stations to burn gas. The announcement came as RJB Mining, which took over most British Coal pits at privatisation, stepped up its attack on the hift from coal to gas. Chris Godsmark, business correspondent, reports.

Eastern submitted the application to the Department of Trade and Industry earlier this week, which would allow the two 1,000 megawatt power stations, Rugeley in Staffordshire and Drakelow in Derbyshire, to burn gas as well as coal. The move would cost pounds 40m, much of which would go on laying four miles of underground gas pipelines.

Rugeley and Drakelow were two of the five large coal generating stations taken over from National Power and PowerGen last year. Together they burn 2.5 million tons of coal, which until next April is supplied by the two privatised generators.

Bill Watson, managing director of Eastern Generation, said it was too early to predict how much coal would be displaced. "I haven't the faintest idea. We do expect to burn some gas but the proportions are too difficult to estimate," he said.

Eastern, headed by John Devaney, chief executive, denied that the application was a bargaining tool to put pressure on coal producers like RJB, when long-term coal contracts expire in the spring. Mr Watson said the shift to gas was the only way Eastern could meet environmental targets for sulphur emissions in 2005.

The news coincided with RJB's response to new price control proposals for the power industry from Offer, the industry watchdog. The company claimed consumers would pay an extra pounds 170m next year because gas generation cost more than coal.

Colin Godfrey, RJB's market development director, said Eastern's decision was another sign of the "uphill struggle" faced by the coal industry. The DTI is currently considering more than 20 applications to build gas- fired capacity and has approved three since the election.

Mr Watson insisted it was sometimes advantageous to burn gas. "There are times of the year when we have a surplus of gas. This is also about hedging our risk in the energy trading arena."