Albanese asks states to recall parliaments to put price caps on coal

Prime Minister Anthony Albanese’s office has asked state governments whether they can recall their parliaments to put price caps on coal,sparking fresh legal advice which shows the Commonwealth has the power to enact the new measures but it would have to fairly compensate producers.

Albanese on Saturday said he hadn’t left it too late to intervene in the gas and coal markets heading into Christmas,despite state parliaments having already adjourned until February,but insisted “there are limits to what the Commonwealth can do on its own”.

Anthony Albanese and Dominic Perrottet are at odds over energy policy.

Anthony Albanese and Dominic Perrottet are at odds over energy policy.Nine

NSW,Queensland and South Australia – which have large export markets in coal or gas – are all wary about the proposal to implement price caps heading into Wednesday’s national cabinet meeting.

The federal government is also facing a revolt from energy giants with the nation’s largest oil and gas producer,Woodside,last weekwarning it may be forced to reassess its investment plans for Victoria’s Bass Strait gas fields if the federal government imposes limits on prices.

Amid growing pressure from the public to lower the price of power bills,the federal government is considering “temporary and meaningful” measures to intervene in the energy market. However,putting price caps on coal and gas would likely require compensating the producers,while the states would want to be compensated for the loss of royalties.

After a request was made last week from the offices of Albanese and federal Energy Minister Chris Bowen to NSW to consider recalling its parliament to create a price cap on coal,the state government sought legal advice from its crown solicitor.

The advice came back that the Commonwealth had the power to implement its own price caps on coal,but under Section 51 of the Constitution,it may have to do it “on just terms” by compensating coal producers. On the other hand,the NSW government could recall its parliament,which has risen for the year,to pass its own laws and it wouldn’t necessarily have to provide any compensation.

A senior NSW government source said while it may not legally have to provide any compensation,politically it would have to compensate coal producers and therefore it didn’t see why the Commonwealth was leaning on states.

“We didn’t appreciate them wanting us to recall parliament at two minutes to midnight to serve their own needs,” the NSW government source said. “If they want to put a cap on coal and override contracts,they have the power to do it,but they would have to pay something.”

Senior federal sources said no decision has been made and the Albanese government hasn’t yet ruled out recalling federal parliament before Christmas to pass whatever legislation is needed to implement the changes.

Asked on Saturday whether his government would compensate the states,Albanese said “we will make an announcement when we make an announcement”,before reconfirming the policy would be announced before Christmas.

He said the government was consulting industry,states and territories,and it wanted to “get this right”.

“We understand the pressures which are on[power prices]. This is a global phenomenon that is occurring,” Albanese said.

“Clearly there are limits on what the Commonwealth can do by itself,that’s why we’re working this through cooperatively.”

The Albanese government has been considering an intervention in the gas market for months,but now believes it also needs to intervene in the coal market to make a meaningful effort to push down electricity prices and not overly distort the market.

Tony Wood,director of the Grattan Institute’s energy program,said the move to add coal had complicated the process and suggested the government could move on gas first. This is because putting a price on gas would only require regulating the short-term spotting market,while going after coal would likely involve intervening in long-term contracts.

“You could keep it narrow,relatively short-term and keep it to the gas,” Wood said.

He said the Commonwealth,states and energy companies should come to an agreement,and the government needed to get a proper handle on the effect a price cap would have on commercial prices.

“The companies are arguing that the government is coming after them with a bazooka,when they’re actually coming after them with a pop gun,” he said.

South Australian Premier Peter Malinauskas said his government stood ready to do “whatever it takes” to lower power prices but it shouldn’t suffer from the fact that it has led the nation in transitioning its energy sources.

“We want to make sure our state’s interests are protected,” he said. “It’s my expectation that South Australians won’t be punished because we’ve done the right thing.”

Victorian Minister for Energy Lily D’Ambrosio said households and businesses in her state “should not be paying European prices for gas”.

“All options are on the table – including capping prices and establishing a robust domestic reserve,” she said.

”We will work very closely with the federal government to come up with a solution that protects households and businesses across our state on price gouging.“

Cut through the noise of federal politics with news,views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weeklyInside Politics newsletter here.

Anthony Galloway is political correspondent for The Sun-Herald and The Sunday Age.

Paul Sakkal federal political correspondent for The Age and Sydney Morning Herald who previously covered Victorian politics and has won two Walkley awards.

Most Viewed in Politics