Andrews seeks gas reserve scheme as states divided on power price cap

Victorian Premier Daniel Andrews calls on Anthony Albanese to implement an east coast gas reservation scheme amid growing splits between governments on how to best bring electricity prices down.

Australian Treasurer Jim Chalmers with his 2022 federal budget. Picture: NCA NewsWire/Gary Ramage

Victorian Premier Daniel Andrews has called on Anthony Albanese to implement an east coast gas reservation scheme amid growing splits between governments on how to best bring electricity prices down.

Mr Andrews said the federal government should back the formation of a West Australian-style reserve which would carve out a percentage of gas production for local users and decouple the domestic market from soaring international prices.

“We need a national domestic reserve so our gas is for our businesses and our households first,” Mr Andrews said.

“The bit that we don’t need, sell that to the world and get the best price you can. We should not be paying European prices when we’re not in Europe.”

While the federal government has previously played down the need for an east coast reserve, Jim Chalmers on Sunday said a price cap was being considered.

The Treasurer said the government’s immediate focus was tackling the issue through regulation rather than higher taxes for producers and subsidies for household bills.

However, the government will consider any proposed changes from Treasury to increase revenue from gas extraction from the petroleum resource rent tax.

“Regulation for us in the near term is a bigger priority than using the budget to deal with this substantial challenge and the code of conduct is a good place to start,” Dr Chalmers told ABC’s Insiders program.

“If there are other ways that we can do this responsibly, which takes into consideration our international partners, the contracts that have been signed and a whole bunch of other competing pressures, then we are prepared to do that.”

But Dr Chalmers was unable to say when electricity prices – forecast to rise by 56 per cent in the next two years – would begin to come down, despite Labor’s pre-election promise to lower bills by $275.

“We know that they will moderate in time,” he said.

NSW Energy Minister Matt Kean said he was concerned time was running out to implement a price cap that would be effective.

Mr Kean, who is pushing for the federal government to subsidise electricity bills, said regulators have made it clear that price regulation needs to include coal.

“We welcome any move that puts downward pressure on power prices. However, I’m concerned we are running out of time for a gas reservation policy to work,” Mr Kean said.

“And you can’t just use a gas reservation policy when coal is setting the spot price for electricity more than 50 per cent of the time.

NSW Energy Minister Matt Kean. Picture: NCA Newswire/Gaye Gerard

Australian Energy Regulator chair Clare Savage. Picture: Australian Energy Regulator

“If you are going to have a cap on gas prices you need to have a cap on coal prices as well.”

Australian Energy Regulator chair Clare Savage told a meeting of energy ministers on Friday that any gas and coal cap would need to be implemented within weeks.

Ms Savage told the ministers that coal generators and gas users were starting to purchase their contracts for the next 12 months on the expectation prices would surge next year.

Coalition frontbencher Michaelia Cash said the government needed to facilitate more gas coming out of the ground.

“You cannot talk about price caps if you are not at the same time saying we are going to address the supply of gas coming into the market,” she told Sky News. “The budget was the exact opposite. The Labor Party have actually cut two projects in excess of $50m that would have enabled further gas exploration.

“All a price cap will do is actually discourage players from bringing on supply.”