The UK government’s rescue package for British Energy has attracted renewed controversy. AES, owner of the coal-fired Drax plant, has asked the European court of first instance in Luxembourg, the EU’s second highest court, to annul the aid deal AES’ case is that the rescue package, originally set at £650 million, seriously distorted the competitive market in Britain where a 40 per cent drop in wholesale prices has plunged several power stations into serious financial trouble.

Melanie Wedgbury, head of regulation at AES Drax Power, said that when EU authorities had approved the aid last autumn, it was on the basis of security of supply and nuclear safety. “They did not even consider, and discounted, our arguments on the anti-competitive nature of the aid,” she said. “Normally, in an over-supplied market, prices will come down. But the market does not stand up under the EU rules when a government steps in and bails out a company which is then able to operate at below its allowable running costs.” AES is separately challenging the government-backed restructuring plan for British Energy which is paying back the bulk of the £423 million it has borrowed from the government from the proceeds of the sale of its Canadian unit, Bruce Power.