Sources familiar with the negotiations over the past week said Queensland and NSW agreed to take the hit on lost revenue from coal royalties in return for a rebate on power bills. NSW is expected to take a hit of about $100 million next financial year in forgone revenue from coal royalties because of the coal price cap.
NSW Premier Dominic Perrottet said on Friday he welcomed the federal government’s financial support to households and businesses, and also its promise of compensation to producers to ensure continuity of supply.
A NSW government spokesperson said on Saturday the state government already had $7 billion in support to ease cost-of-living pressures on NSW households, and would continue to work with national cabinet to finalise the agreed measures.
Victorian Energy Minister Lily D’Ambrosio welcomed the decision but said clarification on the timing of price caps would be needed to determine the impact on bills.
She said if high international prices continue after 12 months, the Victorian government would push for further national action to protect Australians.
Bowen said the government would continue to transition the grid to renewables, “the cheapest form of energy and the one form of energy which Vladimir Putin cannot disrupt”.
Bowen rejected the argument that the coal and gas caps would increase electricity prices by discouraging investment in new projects, saying companies were investing in Australian gas projects before the Russian invasion of Ukraine sent prices soaring.
“The idea that you need somehow elevated war profits to make investments work – I just reject that,” he said.
“Given that 96 per cent of gas was sold before the Ukraine war for less than $12, and the average was $9.20, let’s just be a bit reasonable about the profits you want to make from the Australian people. We’re not capping export prices.”
Samantha McCulloch, chief executive of the Australian Petroleum Production and Exploration Association, said the gas caps would “do the opposite of what’s needed”.
“It will destroy investor confidence in bringing on new supply, and that’s the key to bringing down prices,” she said.
She said the measures also unfairly targeted the wholesale market, when most price rises were by gas retailers are not passed on to producers.
The Albanese government will need the support of the crossbench to pass the legislation in the Senate.
The Greens are expected to support the bill, but oppose locking in lower costs for gas for domestic use because it could slow down the transition to renewables.
Greens leader Adam Bandt said: “If the government is giving out energy subsidies, they should also help households, renters and businesses get off gas, switch to electric appliances and install batteries.
Bowen said: “Nobody’s more in favour of the move to renewables than I am but the way to do it is not to make the prices of existing power exorbitant”.
With Rachel Eddie
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