Coal and gas price cap: Queensland and NSW governments seek compensation

The Albanese Government has softened on a push from Queensland and NSW for compensation if a scheme to cap the price of coal and gas to cut power bills goes ahead.

Any caps on coal and gas prices would be temporary, not permanent, while the Albanese Government has softened on a push from Queensland and NSW for compensation if the scheme to cut power bills goes ahead.

It comes amid speculation the proposed coal price cap could be set about $125 per tonne, down from above $400 per tonne, and would apply only to domestic use and not impact exports.

The Queensland Government fears the caps could cut into the potentially revenue windfall made by its state-owned power generators.

Annual reports show state-owned CS Energy reported an underlying profit of $117 million in 2021-22, up from $88.6 million, while Stanwell reported an operating profit of $430.6 million, up from $321.9 million.

Treasurer Jim Chalmers. Picture: NCA NewsWire / Damian Shaw

The generators have been able to sell power into the energy market at high prices created by the war in Ukraine, while still buying coal at significantly lower cost through locked-in long-term contracts.

Ahead of national cabinet on Friday, Treasurer Jim Chalmers said no decision had been made on whether to pay compensation for any financial loss caused by coal and gas price caps, but that the federal government was “prepared to be reasonable” in negotiations with premiers.

It is understood that any scheme put in place would be a temporary measure and would seek to avoid impacting on international contacts held by coal companies.

Mr Chalmers said the federal government was in discussions with not only its state, but regulators and industries impacted by high energy prices.

“As we come to the table with the state governments in particular, we’re prepared to be reasonable to try and get a landing point between now and Christmas,” he said.

“The reason we haven’t put out any figures is because these discussions are ongoing.”

Queensland Treasurer Cameron Dick reiterated the government would negotiate to “strike a fair value” for the state.

He signalled the state needed to protect its ability to rake in dividends through its state-owned energy assets in order to funnel it back into upgrading the power network amid a transition to renewables.

Queensland Treasurer Cameron Dick. Picture: Dan Peled

“If we’re going to get to where we want to go by 2035, if we’re going to reduce emissions from the energy sector in Queensland, the biggest single emitter in a state … then we need to reinvest in those businesses,” Mr Dick said.

Opposition treasury spokesman Angus Taylor said the federal government was coming up with thought bubbles on energy, without getting closer to a solution.

“The history of price caps is they lead to shortages and that leads to black outs,” he said.

“If you’re a gas or coal producer, why would you want to sell into the domestic market at a fraction of the price you could get internationally.”

Queensland Resources Council chief executive Ian MacFarlane said the mining peak body was on a unity ticket with Premier Annastacia Palaszczuk on opposing the coal price caps, saying it wouldn’t lower electricity prices and rather “chase investment” away from the state.

Originally published as Coal and gas price cap: Queensland and NSW governments seek compensation