The government's plans for rescuing British Energy could be struck down by European competition authorities, the Conservatives have warned.

In an interview with ePolitix.com, shadow energy minister Crispin Blunt said competitors would have a "legitimate" complaint against the £650 million bail out for the troubled nuclear power generator.

BE was granted the loan in September after running into serious financial difficulties. Earlier this month the loan was extended until March.

With restructuring talks continuing in an attempt to reach a deal acceptable to shareholders, bankers and ministers, the government is rushing legislation through parliament which would allow it buy BE or its assets if the company collapses.

The Electricity (Miscellaneous Provisions) Bill was set to complete its final Commons stages on Thursday.

But the Conservatives warned ministers that they are adopting the wrong approach to dealing with the company's problems.

"The government is following the wrong strategy here, they are taking power in the legislation to spend an unlimited amount of taxpayers' money supporting British Energy, that is the wrong strategy," Blunt told ePolitix.com.

"I expect the European Union competition authorities to strike this deal down even if it got approval this year," he added.

He said that the company should be allowed to go into administration rather than be bailed out by the taxpayer.

"The consequences of the government intervening to rescue the company in some form, or taking it back into public ownership, are all worse than putting it into administration."

And he warned that the government's plans could result in the slow demise of nuclear power generation in the UK.

"An important issue here is the future of electricity generation in the United Kingdom. If this company ends up in public ownership, or it ends up as the government are proposing with the rescue package, there is not the slightest chance that the government will come forward with proposals for new nuclear generating capacity.

"In five or ten years time we may need new nuclear generating capacity to generate electricity which in the most economically efficient way meets our climate change obligations, we can be certain we will not have that option available to the country if the company is either nationalised or rescued in the way the government is proposing," Blunt told this website.

If returned to power, the Tories would continue to back nuclear power provided that "it was the most economically efficient way of generating electricity" and helped Britain meet its obligations on reducing greenhouse gases.

"A future Conservative government will not seek to direct and decide the precise mix of fuels in generating electricity.

"We will establish a framework which delivers our Kyoto obligations, within that framework - which will price in the proper cost of carbon and radioactive waste disposal - the market will decide the appropriate fuel mix," said Blunt.