The proposal seeks to ease pressure on household bills next year but has galvanised concerns in NSW and Queensland about the financial impact on power companies,coal producers and state budgets that are due to collect more than $10 billion in coal royalties this year.
The federal government wants to cap domestic coal royalties at $125 a tonne - less than half current market value.Glenn Hunt
Prime Minister Anthony Albanese is on Friday after telling state leaders his government would put price controls on gas – with a draft cap of $13 per gigajoule – but would expect states to enact the changes in the coal market.
The state objections intensified on Wednesday after they received a series of broad principles from the federal government that did not include any modelling of the financial impact,with no certainty about the federal cash to be spent to help make the new measures work.
Treasurer Jim Chalmers has raised the prospect of using the Commonwealth budget to help achieve a result but warned against treating Canberra as a “bottomless pit” of money when the federal budget has almost $1 trillion in gross debt.
Chalmers said miners were gaining prices of up to $300 per tonne for coal due to the energy crisis caused by the war in Ukraine but that the federal plan aimed to help manufacturers and consumers.
Prime Minister Anthony Albanese is trying to quell a power struggle with the states over a plan to lower energy bills.
“If we can bring in a temporary regulation that limits some of these price increases,that’s our preference,” he told ABC Radio,but he did not rule out higher taxes on coal and gas exporters.
Playing down expectations for a cut to household bills in absolute terms,Chalmers said:“Prices will go up next year,but if we can make them go up by a little bit less,then we should try and do that.”
Queensland Treasurer Cameron Dick praised the “good faith” of Chalmers in the talks over compensation.
The latest this financial year,up from $7.2 billion last year.
NSW Treasurer Matt Kean has tipped an increase in coal royalties from the $3.6 billion the state received last year.
But the impact is expected to go beyond the state budgets because a $125 cap on coal might hurt coal-fired generators such as Origin Energy’s Eraring power station in NSW because it does not have contracts below the cap.
Most other power stations have locked in their coal supplies at prices ranging from $50 to $120 per tonne,which means they would not be affected by the cap unless they had to go to the spot market for additional supplies.
Coal miners,meanwhile,could see their profits cut if they were forced to sell to the local market at $125 for an extended period of time.
‘Prices will go up next year,but if we can make them go up by a little bit less,then we should try and do that.’
Jim Chalmers
Australia exports 85 per cent of its coal but the remaining 15 per cent remains vital to the east-coast electricity grid,although many power stations have long-term contracts with nearby coal miners to shield them from high global prices.
Kean urged Chalmers to do more to make the plan work without hurting NSW business by comparing the energy crisis to the pandemic response from former treasurer Josh Frydenberg.
“Josh Frydenberg used his budget to prop up the country during the COVID crisis,” Kean said.
“Why is Jim Chalmers refusing to use his budget to help struggling families and businesses through this cost-of-living crisis?
“He has the biggest budget in the nation and now is not the time for Jim Chalmers to be the Christmas grinch and to pass on billions of dollars in bills to NSW taxpayers.”
But the October 25 federal budget forecast a $36.9 billion deficit this financial year and does not project a surplus in any future year. Queensland revealed on Wednesday that its budget would post a $5.1 billion surplus this financial year,while NSW projects a surplus in 2024-25.
and did not rule out compensation. When asked on Sky News if the cost could be several billions of dollars,he said “it remains to be seen” and said he hoped for an outcome by Christmas.
Energy Minister Chris Bowen will meet his state and territory counterparts in Brisbane on Thursday in the next step toward a deal,but his meeting will focus on plans to add more power generation to the electricity grid and encourage the shift to renewables.
The energy meeting is expected to unveil an energy security policy to build more reliable – or “despatchable” – electricity generation such as hydropower and to install more batteries to store renewable energy.
The new plan will drop the idea of making coal-fired power part of the plan,after pushback from Victoria and other states that did not want to pay incentives to fossil fuels.
The October 25 federal budget forecast a 56 per cent increase in electricity bills over the next two years and a 44 per cent increase in household gas bills over two years,raising expectations the government would act on the problem.
Average household electricity bills were $1434 last financial year,according to the most recent. A 56 per cent increase would add $803 over two years.
Average household gas bills were $1128 nationwide,according to the latest analysis by the (AER) based on advice from Frontier Economics. A 44 per cent increase would add $496 over two years.
Victorian customers would be hit much harder by the gas price spike than others,given the state’s gas usage per customer was 49,799 megajoules per year compared to only 18,384 in NSW and 7,238 in Queensland in AER reports.
Cut through the noise of federal politics with news,views and expert analysis from Jacqueline Maley..