Utility E.ON (EONGY, EOAN.XE) will close one gas-fired power station and expects to reduce output at three others despite continued warnings from the U.K. 's National Grid and others that Britain faces a capacity crunch and potential blackouts, The Guardian reported Thursday.

The German-owned gas and electricity provider said it planned to end power supplies from Stoke-on-Trent in the Midlands and scale back operations at Castleford, Sandbach and Thornhill in the north of the country, The Guardian wrote.

E.ON recently closed the Kingsnorth coal-burning power station in Kent while another big six supplier, RWE, has closed Tilbury on the Thames , The Guardian said. The huge Eggborough facility in North Yorkshire , owned by private equity firms, is also under threat of closure while Centrica, the owner of British Gas, and SSE have mothballed gas-fired stations, The Guardian said.

Power companies argue that while coal-fired stations are being hit by tougher pollution regulations emanating from Europe, the economics of gas ones are also being hit by a combination of factors including relatively high wholesale gas prices when compared with cheap coal supplies exported from the U.S.--where it has become surplus to requirements thanks to the country's shale gas boom, The Guardian said.

"Over the last five years, E.ON has invested GBP6 billion in the U.K.'s infrastructure, but there is no doubt that the operational environment remains very challenging, particularly for CCGT (combined cycle gas turbine) power stations, which in many areas are continuing to fight for survival in the current market, providing increasing uncertainty around future generating capacity planning," said Richard Pennells, a director at E.ON UK, according to The Guardian.

E.ON, like German-owned RWE, is also suffering from wider financial problems in its domestic market, which led to a prediction in November that it could be forced to close more than 11,000 megawatts of capacity around Europe , The Guardian said.
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