Matt Kean warned price caps on coal won’t ease energy pain

Attempts to cap prices will not lead to real reductions in power prices but will hurt coal mining communities, advocates for producers say.

The NSW government has been warned against interfering in the local coal market to lower power prices because of the risk of job losses and fuel shortages.

On Thursday the NSW Minerals Council wrote to state treasurer Matt Kean saying, “An artificial price cap on domestic coal supply will distort the coal market, potentially disrupt existing commercial arrangements, create disincentives for coal producers to supply local power stations, and may force some producers to supply coal at a loss, threatening jobs, predominantly in regional coal mining communities.”

Mining jobs in the Hunter Valley could be at risk if the state government imposes price caps.

The organisation also said that there is “strong evidence that price caps on domestic coal sales will have little impact on electricity prices.”

Global coal prices have soared over the past year, largely driven by Russia’s invasion of Ukraine, however The Daily Telegraph understands that 80 per cent of the coal sold locally is done so on existing contracts that are far lower than the export price.

Power stations such as the Vales Point Power Station at Lake Macquarie often obtain coal at much lower than global spot prices.

According to NSW Minerals Council CEO Stephen Galilee, imposing price caps could disrupt these existing relationships “will cause significant damage to the sector, to coal mining communities, and the NSW economy.”

Mr Galilee said that coal miners were subject to the same inflationary pressures as other industries and price caps would only harm miners.

“Like other industries, coal producers have experienced increased costs due to inflationary and other pressures.”

“Cost increases have been experienced across a range of inputs, including for fuel, labour, equipment, and services, as well as transport costs,” he said.

The letter comes as reports emerge that the Albanese government has asked the NSW government to impose caps, with a dispute over compensation bills with the potential to run into the tens of billions of dollars at stake.

Originally published as Matt Kean warned price caps on coal won’t ease energy pain