Heatwave sends power prices soaring as fans and air conditioning drain grid.

• Fears of higher bills as costs quadruple
• Generating firms fire up extra stations to cope

A massive increase in demand for electricity to power fans and air-conditioning systems during the UK's heatwave sent power prices soaring yesterday to almost four times their level on Monday.

There are fears of more costly domestic bills as electricity firms are forced to pay up to £300 a megawatt hour for their wholesale power, compared with £81 earlier in the week.

The power crunch has been compounded by the fact that some power stations are out of service, undertaking their summer maintenance programme, and new supplies from France are being blocked by heavier demand there too.

National Grid, the network utility, has already issued an "insufficient margin warning" saying the safety net of spare power-generation capacity was under threat. The owner and operator of the electricity transmission system in England and Wales said the situation had eased yesterday as new power generating capacity was brought on stream.

Npower fired up two extra oil-fuelled power stations in Hampshire and Essex, while Centrica increased output from its gas-fired South Humber station.

National Grid insisted last night that there was no risk of blackouts at present, and Centrica said it was too early to say whether domestic electricity bills would have to rise.

Drain: Air-conditioning units have placed massive pressure on the network

Meanwhile, UK Coal, Britain's biggest coal producer, was trying to engineer a comeback for the troubled mining industry by taking advantage of soaring coal prices and renewed political support . The company is trying to renegotiate long-term contracts with power customers, such as EDF, so as to invest tens of millions of pounds into new seams.

The plan was announced by UK Coal alongside a trading statement predicting a first-half profit of £7m, compared with a loss of £31m for the same six-month period in 2005.

"Many of the contracts were signed by UK Coal at a time when world prices were half the level they are now. We want to extract greater value so we can plough the money into bringing on new capacity," said Stuart Oliver, a company spokesman. "In the light of comments made in the [government's] energy review about the need for energy security and reduced dependency on foreign imports, it makes sense to access the 300m tonnes of potential reserves that UK Coal has."

While there has been growing debate about the wisdom of relying too heavily on Russian gas, UK Coal argues that people have overlooked the fact that Britain is paying £2bn a year to import 35m tonnes of foreign coal. Much of that coal is coming from Siberian mines and a recent DTI document said total energy imports from Russia made up 18% of the UK's supplies from abroad.

UK Coal says British-mined coal is cheaper than imports brought in to fuel power stations - as much as 1.60p a gigajoule, compared with 1.35p for British coal. The firm, however, showed debts of £104m on June 30 - a situation that makes it all the more important for it to raise the £50m worth of investment it needs to bring on-stream the next 30m tonnes of reserves and save collieries.

Sources: http://www.business.guardian.co.uk

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