SA state government to demand compensation from Commonwealth for gas price cap
The Prime Minister has been dealt a fresh blow as SA vows to demand compensation for his plan to cap gas prices.
SA News
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South Australia will demand financial compensation from the federal government over its controversial plan to cap gas prices.
It will further complicate Prime Minister Anthony Albanese’s plan to intervene in the energy market, as he faces a revolt from Queensland and NSW over a proposed cap on coal that would lower their income from lucrative royalties.
Both states have demanded “adequate compensation” before agreeing to the plan – and SA Energy Minister Tom Koutsantonis confirmed he would make the same demands in the event of a gas price cap.
“The eastern states have been vocal about requiring compensation for any cap on coal,” Mr Koutsantonis said ahead of a crucial meeting of Australian energy ministers on Thursday.
“We would expect the same level of consideration in the event of a cap on gas.”
Treasurer Jim Chalmers said no decision had been made on whether to shell out for compensation, but revealed he was “prepared to be reasonable” in negotiations.
In an effort to provide consumer relief from soaring power bills, the federal government is expected to place a temporary cap on gas prices at $12 per gigajoule, drawing the ire of South Australia’s largest company and gas giant – Santos.
A company spokeswoman said on Saturday caps were “exactly the opposite of what we need right now” and would “remove the incentive to invest in more supply”.
Companies must pay the SA government royalties on gas extracted from wellheads at a rate of 10 per cent of sale value. In the September quarter, average wholesale gas prices were at $27.29/GJ in Adelaide.
A new report commissioned by the NSW minerals council and published by consulting group Boardroom Energy warned price caps would be unlikely to result in cheaper retail power bills.
“If a cap persists over the longer term, it will impact long-term supply decisions … which will only put upward pressure on electricity prices,” the report found.
From Covid isolation, Mr Albanese is expected to take his energy intervention plan to a virtual National Cabinet meeting on Friday. The proposed cap on coal is speculated to be $125 a tonne.
Opposition energy spokesman Angus Taylor lashed Labor’s “thought bubble” energy policies, warning a cap on coal and gas could lead to supply shortages and blackouts.
“If you’re a gas or coal producer, why would you want to sell into a domestic market at a fraction of the price you can get in the export market,” Mr Taylor said.
Mr Chalmers said the war in Ukraine and the Coalition’s “policy chaos” meant Australians were “paying a really hefty price” for energy.
“We’re trying to work out a way, working respectfully and constructively with the states, with the regulators, with the various industries to see if we can take some of the sting out of these energy price rises,” he said.
gabriel.polychronis@news.com.au
Originally published as SA state government to demand compensation from Commonwealth for gas price cap
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