While consumers up and down the country struggle with astronomic rises in utility bills, those generating power are also being hit by high fuel prices, as investors in Drax, the company behind Europe’s largest coal-fired power station, found out yesterday.

Drax, which produces about 7 per cent of the UK’s electricity at its massive plant near Selby in North Yorkshire, suffered a 45 per cent fall in first-half pre-tax profits to £149.5 million, hit by the higher costs of fuel and by paying to offset its pollution, with its own bill for generation rising 86 per cent to £412.8 million.

Spot prices for coal have been at record levels over the first half of the year, rising 72 per cent since the end of 2007 to hit $218 a tonne by June 30, reflecting tight supply and strong demand from China and India. The cost of carbon allowances (which the company must buy under European Union rules to offset the ten million tonnes of CO2 that it pumped into the atmosphere over the past six months) rose on average more than fivefold to £16.5 per tonne.

However, the company said that it continued to improve its environmental performance and that it could benefit as new EU policy on carbon made life too difficult for some of its older rivals, forcing them into retirement, cutting capacity and raising electricity prices. Yet higher electricity prices and a £50 million dividend pay-out could not save the shares, which were down 29½p to 693½p.

Overall, the FTSE 100 index stormed ahead more than 2.5 per cent, up 134.3 points to 5,454.5, pushed along by strong results for financials and the falling oil price, setting up a tug-of-war between those cheering weak oil and London’s raft of energy stocks.

Legal & General, up 11.7p to 108.3p, lifted the insurance sector after it beat expectations with a 6 per cent rise in first-half operating profits. Aviva gained 38¾p to close at 531½p and Prudential rose 41p to 588p.

Standard Chartered, the Asia-focused bank, up 119p to £15.42, provided welcome relief for the banking sector, announcing a 31 per cent rise in first-half net profit. Barclays, which reports its interims on Thursday, rose 30p to 369¼p after selling its life insurance unit for £753 million to Swiss Re.

Commodity stocks were driven lower by falling oil and metal prices. Tullow Oil, down 32½p at 735p, BG Group, down 36p at £10.50, and BP, 6p lower at 512p, were all hit as the cost of a barrel of oil slumped below $120 to a three-month low. Miners suffered as base metals prices fell amid fears of a slowdown in demand. Analysts at Evolution said that funds that had taken substantial positions in the mining sector were being forced to sell as they look to limit risk amid tighter credit. Eurasian Natural Resources fell 48p to 950p, Rio Tinto fell 55p to £47.50 and BHP Billiton was 17p lower at £15.14.

In the FTSE 250, Michael Page International, the recruiter, rose more than 30 per cent, or 86¾p, to 352p after revealing a takeover approach by the Switzerland-based Adecco. Hays, its rival, rallied 8¾p to 90p.

New York: US shares extended gains impressively as a sharp pullback in oil prices fuelled hopes of a revival in consumer and business spending and eased inflation concerns. The Dow Jones industrial average closed up 331.30 points at 11,615.80.

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