Reforms pledge level playing field

The UK government has published its white paper on reforming the country`s electricity sector, identifying changes to improve competition and ensure a level playing field for different fuels.

The main impact of the reforms will be to ensure that coal fired generation remains competitive. The government will restrict the development of new natural gas fired power stations and encourage the generators to buy more coal. An overhaul of the electricity trading arrangements to encourage competition in generation will also improve the outlook for coal.

The government also wishes to encourage greater competition in domestic electricity markets, and will ask regional electricity companies to separate their local distribution and supply business. The two main generators, National Power and PowerGen, will have to divest capacity to reduce their market share in generation.

The reforms are good news for the UK coal industry, which feared large job losses and mine closures. Independent power developers claim that other sectors of the economy will be hurt. However, the restrictions on gas fired development are temporary.

PowerGen has already agreed to sell 4 GW of capacity in return for being able to buy East Midlands Electricity, while National Power has said that it “will be able to agree acceptable terms for a disposal of capacity.” The two generators are expected to sign new supply contracts with coal producer RJB Mining.