Key points
- Perrottet has said coal-rich NSW should not wear the cost of policy changes.
- Households are expected to face a 56 per cent increase in electricity bills by next year.
- The government is considering taxation or regulatory measures, many opposed by interest groups.
Prime Minister Anthony Albanese is facing a revolt from the states over energy policy with NSW Premier Dominic Perrottet declaring the federal government would have to repay the state’s taxpayers if it sought to cut skyrocketing energy costs by imposing a cap on coal prices.
Albanese is expected to announce a suite of measures to reduce soaring energy costs next week in what has become a key test of his government. Among the measures being sought by industry and unions are caps on the price of gas and coal.
But Perrottet has warned that coal-rich NSW should not wear the cost, which would hit state coffers by reducing royalty payments from miners that are calculated based on the value of coal sales.
Premier Dominic Perrottet says NSW taxpayers should not wear the cost of changes to federal energy policy.Credit:Kate Geraghty
“The federal government has come out and said that they will provide solutions to reduce the cost of living across the country and we support that,” Perrottet said during a press conference on Thursday.
“But ultimately that’s a matter for them to come out with those solutions in relation to a cap.
“If one is introduced in NSW, the taxpayers of NSW would need to be compensated.”
Energy prices leapt around the world after Russia’s invasion of Ukraine, with Australian households expected to face a 56 per cent increase in electricity bills by next year. The federal government is moving to find a way to protect households and businesses from the full impact of the rises, but fears direct subsidies could drive inflation.
This leaves the government considering a range of taxation or regulatory measures, many of which are opposed in part or wholly by various interest groups, including state governments.
Australian Industry Group chief executive Innes Willox said it was understandable state governments would champion their own interests as measures were being developed, but that they would all wear the cost should no serious response be adopted.
“The only thing worse than doing some of the things which have been proposed will be doing nothing. Eventually [the state and federal governments] will have to come together on this,” he said.
Measures to increase domestic supply would not help, “because the problem is not that we don’t have enough local supply, it is that Russia invaded Ukraine and caused a global shortage”.
NSW Treasurer and Energy Minister Matt Kean sought to cast the looming crisis as a federal responsibility on Thursday, telling Sky News he was happy to work with federal Energy Minister Chris Bowen on finding a solution, but saying he had legal advice that the federal government had the power to cap both coal and gas prices.
“That will solve the issue for Queensland, NSW, Victoria, South Australia and Tasmania,” he said. “This is a national problem and we need a national solution.”
Woodside, the nation’s largest oil and gas producer, has warned it may be forced to reassess its investment plans for Victoria’s Bass Strait gas fields if the federal government imposes limits on domestic fossil fuel prices.
Queensland Premier Annastacia Palaszczuk has also voiced her opposition to a coal price cap, warning the Albanese government on Tuesday to keep its “hands off our generators” without full compensation to her government’s state-owned coal sector.
Instead she suggested the NSW, Victorian and federal governments front the cost for a gas pipeline from her state to ease national power prices.
Palaszczuk said in state parliament that with “an abundance” of gas in Queensland and more to develop in the Bowen and Galilee basins, the federal government – along with NSW and Victoria – should consider the idea of a pipeline.
“If the issue is of supply for energy, for gas, to get to those southern states, there is a solution that I’m putting on the table that is readily available,” Palaszczuk said.
“And they will be able to pay for that pipeline … and we would release that extra domestic gas – that is an option that is very, very conceivable.”
Industry Minister Ed Husic said on Thursday federal cabinet was “considering this issue deeply”.
Husic confirmed the government was not contemplating measures that would impact energy exports, stating that “we’re not talking about dealing with anyone’s contracts”.
He called for the Narrabri gas project in NSW to be progressed to open up new supply but said the East Coast market was not currently in shortfall.
“We’ve got a lot of supply, the issue is the price at which that supply is made available,” he said.
Husic has said manufacturers were being driven out of business by high gas prices and gas companies profiteering.
He said “more realistic pricing” is needed and said reform to the industry Code of Conduct “to improve the bargaining environment in which those gas contracts between the big, big producers and manufacturers are conducted”.
The South Australian government has also reportedly objected to another potential solution, arguing the state should not be made to contribute to an east coast domestic gas reserve.
The government has said it would announce a plan by the end of the year, which will be discussed at a national cabinet meeting next week.
With Matt Dennien
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