ACCC warns power prices will continue to rise as national cabinet meets to discuss cap

As national cabinet moves to hash out a plan to drive down power prices it can be revealed that Queensland bills have already shot up $300 in six months.

• Editor’s view: Energy plan must help consumers
• Negotiations threaten PM’s bond with Premier

Electricity bills are expected to remain high as Queenslanders, who have already copped a $300 increase, are being warned by the competition watchdog to expect more pain ahead.

National cabinet will convene on Friday to hash out a plan to drive down prices through 2023, amid fears of a prolonged shock to household budgets.

And the nations energy ministers, meeting in Brisbane on Thursday, confirmed they had come to a long-awaited consensus on a mechanism to maintain the reliability of the electricity system moving forward — without paying coal companies to keep the lights on.

It comes as the Australian Competition and Consumer Watchdog, in its latest national electricity market report released on Thursday, revealed the average power bill had already gone up by 23 per cent.

Prime Minister Anthony Albanese will convene a virtual national cabinet as he recovers from Covid. Picture: Morgan Sette

This means the average household power bill had already risen by $300 in the six months to October, with signs it would “increase further”.

Volatility and high prices in the market have also pushed small electricity retailers to the wall, with six leaving the market since May — leading to decreased competition.

“With prices expected to remain high, governments and regulators need to ensure policy and regulatory settings around energy affordability continue to evolve to better protect consumers,” the report stated.

The report from the watchdog landed the day before national cabinet meet virtually on Friday afternoon, after an initial delay following Prime Minister Anthony Albanese positive Covid-19 test earlier this week.

Settling a pathway forward on dampening power prices is at the top of the agenda.

Mr Albanese has been ramping up pressure on the premiers to accept a coal and gas price cap, with negotiations now focused on where it will be set as well as compensation will be paid for foregone revenue.

Queensland has not backed down from its calls for a “fair” compensation deal, with its state-owned power generator meaning it has the most revenue to lose of any jurisdiction.

This comes as New South Wales Treasurer Matt Kean claimed the state was willing to forego royalties revenue if the federal government provided financial assistance to “business and families set to be impacted” by coal and gas price caps.

It is unclear which businesses, beyond coal and gas producers, will be disadvantaged by a price cap.

It is expected the Commonwealth will propose a temporary cap on coal prices, set about $125 per tonne with room for negotiation, as well as a cap on gas prices.

This would apply to domestic markets, not export markets, significantly limiting the hit faced by resource companies and state government’s royalties.

Any agreement will likely by legislated in February, to allow the Australian Energy Regulator to take it into account when it sets the “default market offer” for residential power bills later the same month.

This will not flow through to household power bills until July.

As well as the energy price crisis, premiers will also be presented with a Covid update on the state of the recent Omicron variant waves heading into Christmas, as well as disaster planning ahead of the summer season.

Federal Energy Minister Chris Bowen met with his state counterparts in Brisbane yesterday. Picture: Dan Peled

Energy ministers on Thursday, including Queensland’s Mick de Brenni, revealed they had agreed in principal to set up a new mechanism to ensure the reliability of the electricity system.

And it will not involve paying coal power plants to keep the lights on — unlike previously proposed by the former Coalition government.

Instead the so-called “capacity investment mechanism”, facilitated by the Commonwealth, will financially underwrite dispatchable renewable energy projects thus helping get them off the ground faster.

This would benefit the state government’s Queensland Energy Plan and its bid to build two pumped hydro plants.

“What we have decided to do is accelerate sensible market reforms and investment in new energy storage and the grid,” Mr de Brenni said.

“This is about prices because only when the market is dominated by clean, renewable energy will we see wholesale energy prices come down permanently.”

According to federal Energy Minister Chris Bowen the mechanism would “unlock around $10bn of investment in clean dispatchable power to support reliability and security”

Ministers also agreed to do more work hash out manufacturing supply chains so Australia can build more components it needs for the transition to renewable energy under an initiative largely led by Queensland.