SCOTTISHPOWER has abandoned plans to replace a coal-fired power station in East Lothian with a gas-fired alternative complaining a tax for being in Scotland is a key reason.

The company says hefty transmission charges imposed by the National Grid which mean the further north you are the more you pay, was a key reason for abandoning plans for Cockenzie and the catalyst for the closure of the coal-fired Longannet power station next year.

They say the transmission charges and high carbon taxes together make it no longer economic to generate electricity from coal or gas in Scotland.

The station at Cockenzie, whose huge chimneys are a well-known landmark, was closed in 2013 because it did not meet modern environmental standards.

ScottishPower said then that it wanted to convert the plant to burn gas, rather than coal.

They said at the time that there were no compulsory redundancies, with workers offered other jobs, redundancy or early retirement.

But work on the new 1000 MW power station at Cockenzie was delayed amid continued speculation over an uncertain economy and now it will not be progressed.

Scottish Power, owned by the Spanish utility group Iberdrola, has complained at what it calls a “disproportionate” transmission charging system which means it has to pay £40 million a year in penalties and estimate tens of millions further for the Cockenzie plant.

It said last year that to continue operating until 2018, Longannet would need to pay more than £120m in fees. However if in the London area, it would have instead received a fee of £4m a year to stay connected.

The Scottish Government has also complained about the unfair transmission regime that it said favours plants located near the UK's biggest population centres. It has established a taskforce to support the 230 workers, businesses and communities impacted by the Longannet closure.

It is argued that generators that are far from the main centre of demand are charged more because it costs more to transport the energy further; maintaining long power lines requires more maintenance.

According to the SNP as of April, locational pricing meant that the north of Scotland are facing the highest charges in the UK at £26 per kilowatt compared to subsidies of £5.80 per kilowatt received by generators in Cornwall.

Estimates suggest that whilie Scottish generators produce about 12% of UK generation they account for over 40% of the transmission costs, or about £100 million per year more than generators in the south.

Energy minister Fergus Ewing said: “The decision is ultimately an unfortunate and direct result of the UK’s discriminatory transmission charging system that penalises Scottish electricity generators in comparison to those in the south of England.

"In Longannet’s case the extra charges amount to £40 million per year. However, despite raising our concerns repeatedly with the Prime Minister, absolutely nothing has changed."

The Prospect union, which represents Longannet staff, also criticised the transmission charging regime, saying it was “senseless” to remove a station that generated enough electricity for 2m homes at a time of tight power supply margins.

Prospect official Richard Hardy said: “The news is a body blow, not just to Prospect members at the plant and the economy of West Fife and the Forth Valley, but also to Scotland’s hopes of remaining self-sufficient in energy generation."

The National Grid, which manages the network of pylons and cables, defended the charging, saying it was set by energy regulator Ofgem and that it was actually providing savings for Scottish consumers.

"It is a locational arrangement, which means the further you are away from demand for electricity, which is the south of England, the more you you have to contribute to the cost of getting your electricity to the market," said a National Grid spokeswoman. "It has the effect, actually, of reducing the bills for Scottish consumers because there is in Scotland enough electricity to meet their needs, so they end up with £11 less on their bill per year because of the arrangements."

Ofgem has said that transmission charges for generators and suppliers vary by location to reflect the cost of running and upgrading the network using a formula approved by them.

The aim of the higher fees was to encourage power companies to invest in generation capacity where it is most needed.

Longannet, the UK's second largest coal power station, will now close on March 31, 2016, marking the end of its 46 years of power production in Scotland.