‘A sense of urgency’: capping coal prices to reduce power bills would need state support, cabinet told
The Albanese government could struggle to provide comprehensive energy price relief, unless the governments of New South Wales and Queensland cooperate with a plan to temporarily cap the wholesale price of coal.
The energy minister, Chris Bowen, updated cabinet on Monday on the components of Labor’s long-telegraphed regulatory intervention in the energy sector.
While there is confidence the commonwealth has the levers to reduce gas prices, there is concern a replica intervention in the coal market might be more complex for Canberra to execute, and could open the possibility of legal challenges given producers will resist.
A number of analysts have pointed out that a gas price intervention in isolation will be insufficient to bring about noticeable power price relief for households given the bulk of power generation on the east coast comes from coal.
The prime minister, Anthony Albanese, signalled publicly after cabinet met on Monday that the government’s planned intervention would be enacted before Christmas.
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It is expected Labor will adopt a suite of reforms to address an anticipated 56% increase in electricity prices and 44% increase in gas prices by the end of next year – a forecast outlined in the October budget.
Russia’s illegal invasion of Ukraine has sent global gas and coal prices soaring. The Australian Competition and Consumer Commission has flagged publicly it is looking at wholesale prices as part of its policy advice to the government.
The ACCC chair, Gina Cass-Gottlieb, recently told a Senate estimates hearing she had been asked to consider wholesale prices and any other “regulatory gaps” relevant to the current circumstances facing the east coast gas market. Cass-Gottlieb said she was preparing advice covering potential price caps, bargaining provisions for smaller energy users, and a legally binding code of conduct for the gas sector.
Guardian Australia understands the latest policy advice to government is the commonwealth has a number of levers to reduce gas prices for industrial users through existing mechanisms, like the industry code of conduct. But interventions in the coal market are normally driven by the states.
After the coal concerns were raised in cabinet on Monday, Albanese later acknowledged that finalising the measures would require cooperation between the different tiers of government.
Albanese told journalists he was having one-on-one discussions with his state counterparts and would see the premiers and chief ministers as a group on 6 December for their regular catch up ahead of a national cabinet meeting on 7 December. Bowen is also scheduled to meet his state and territory counterparts around that time.
“We have a sense of urgency, but we also have the sense of making sure that we get it right and get the detail right,” Albanese said on Monday.
“These issues are not simple because of the different ownership structures, because of the different sources of energy, because of different powers that exist between the commonwealth and state and territory governments, because of the interaction of the national energy market,” the prime minister said.
“These are complex issues. We are working them through”.
Albanese said the government’s objective with the regulatory intervention was to “make a difference [in power prices] compared with the projections that were made at budget time.
“We want to make sure that we do make a difference. We have been meeting with companies as well as departmental resources being used around the clock. People are working very hard on these issues. We’ve been meeting with the manufacturing sector as well”.
The broad policy remit for the Albanese cabinet includes executing temporary power price relief measures that don’t disrupt existing export contracts and don’t involve taxation. Policy work is being formulated by a number of government departments and regulatory agencies.