New EU inquiry into British Energy

British Energy runs eight power plants in the UK

The European Commission has reportedly launched a new investigation into British Energy after its request to local councils to defer business rates it owes on plants in their boundaries.

In November the company approached councils to defer rates until February, the deadline for its restructuring plans, to maintain its cash flow.

We've asked local authorities to allow us to defer the payments but haven't agreed the exact terms of the deferment

British Energy

The troubled nuclear power company has secured rate deferments from Hartlepool and Lancaster City councils but been rejected by West Somerset council.

A British Energy spokesman told BBC News Online the company was "not aware" of a new investigation.

The Observer newspaper reported that a letter from European Competition Commissioner Mario Monti confirmed an investigation into the rate deferrals was underway.

British Energy received a £650m loan from the British government in October to keep it out of administration, which has been approved by the Commission after it decided it was not a state subsidy.

Council tax

"We've asked local authorities to allow us to defer the payments but haven't agreed the exact terms of the deferment," a British Energy spokesman told BBC News Online.

Lancaster City Council at the start of November allowed British Energy to defer £2m until February on two power stations that the firm runs in nearby Heysham.

The deferment leaves open the question of who will pay £18,000 in interest on the rates.

"After 14 February we'll sit down and talk," the British Energy spokesman said about negotiating who pays the interest.

A restructuring plan is due to be announced by 14 February and loan falls due in March.

British Energy, which owes creditors £1.26bn, owns eight nuclear power stations in Britain.

Shares closed at 6.33p of Friday against an all-time high of 730p.