Federally funded energy rebates for households

Federally funded energy rebates would be funnelled through states in exchange for NSW and Queensland capping coal prices, under demands being brokered.

The NSW government is leading the push for a household rebate, which is believed to have in-principle backing of the Albanese government. Picture: AFP

Federally funded energy rebates for households to help with soaring power bills would be funnelled through state governments in exchange for NSW and Queensland capping coal prices, under fresh compensation demands being brokered overnight with the ­Albanese government.

The NSW government is leading the push for a rebate, which is believed to have in-principle backing of the Albanese government. The rebate in NSW could be worth as much as $280 for households.

The temporary rebate would be in addition to existing energy rebates already offered in NSW and Queensland for low-income households and are designed to cover the six to 12-month gap until price rises are projected to flatten under coal and gas price caps.

Negotiations on the proposed funding package, which NSW and Queensland still deemed to be insufficient, continued on the eve of Friday’s national cabinet meeting, amid a shift in emphasis from compensating coal producers to consumer relief.

While NSW has agreed to forgo lost royalties from imposing a coal price cap in exchange for commonwealth financial support, The Australian confirmed that compensation would be tied to energy rebates administered by state governments for struggling households and businesses.

The Albanese government previously ruled out direct cash payments to households to cover the cost of rising energy bills due to their potentially inflationary effect. However, the new rebate would work through existing state government mechanisms and appear as a reduction in a household energy bill.

While NSW and Queensland are still demanding compensation for coal producers and generators, chiefly for contracts that had to be overridden under the $125-a-tonne price cap being demanded by the commonwealth, NSW Premier Dominic Perrottet has said his priority is reducing the burden on consumers.

NSW government sources said they were “inching closer” to a deal and were optimistic the federal government would put “real money” on the table to alleviate the energy cost crisis. It is understood that the Queensland government was also close to reaching agreement.

The NSW government was also demanding, as a minimum, compensation for any legal ramifications that might occur in overriding coal contracts affected by a price cap.

Any consumer rebate agreed to would likely be limited to lower-income households.

As national cabinet leaders edged closer to finalising the short-term fix for spiralling energy costs, including a gas price cap of about $13 a gigajoule, energy ministers on Thursday unveiled a capacity mechanism that excludes coal and gas over the medium to long term in favour of new renewable dispatchable ­energy and storage.

Following a five-hour meeting in Brisbane, federal Energy Minister Chris Bowen said a new ­capacity investment scheme would unlock about $10bn of ­investment in clean dispatchable power and pump 6GW into the electricity grid.

Leading industry figures criticised the decision, which ignored advice from experts and the ­Energy Security Board to adopt an “agnostic approach” that would ensure investment in coal and gas to guarantee baseload power and support the renewables transition.

Tomago Aluminium chair David Fallu said the nation’s largest smelter and biggest single consumer of electricity would need gas to “fill the breach when renewables aren’t generating”.

“Ruling out gas categorically as a short-term solution from a firming perspective, I think will create challenges,” Mr Fallu said.

Energy investor Trevor St Baker, former owner of the Vales Point coal plant in NSW, said energy ministers needed to keep AGL Energy’s Liddell coal plant open beyond its April 2023 closure date to ensure the lights stayed on. Liddell accounts for 10 per cent of NSW power supply.

An Australian Competition & Consumer Commission report on Thursday warned that electricity bills would remain high in the short to medium term, with the soaring cost of coal and gas expected to keep wholesale prices elevated through to at least 2024. After Treasury forecast a 56 per cent jump in power prices over two years in the October budget, the ACCC said smaller electricity retailers were struggling to juggle their exposure to high and volatile wholesale electricity prices.

NSW Treasurer and Energy Minister Matt Kean said the state was “willing to forgo any royalties” in negotiations with the commonwealth.

“This is not about royalties; this is all about consumers,” Mr Kean said. “We’re almost ready to sign up and I think we’re going to get a great outcome. NSW is prepared to take the hit (on royalties) because we want to protect consumers and businesses.”

Queensland Premier Annastacia Palaszczuk, who last week railed against a coal price cap and warned the federal government to keep its “hands off our generators”, was due to receive a briefing from senior bureaucrats and her Energy Minister Mick de Brenni before she attended the virtual national cabinet meeting.

Mr de Brenni, who this week met unions, consumer, industry and conservation groups to discuss the energy plan, said there was “real consistency between what Queensland and NSW, the commonwealth and all states and territories think is important – that we protect households and businesses from volatile global fossil fuel markets”.

Victorian Premier Daniel Andrews said he had not seen enough detail of the Albanese government’s coal and gas price caps proposal to endorse it before the national cabinet meeting.

In addition to negotiating an energy deal, national cabinet leaders will receive a Covid-19 update amid an explosion in infections ahead of Christmas and disaster planning and recovery measures for summer.

Peter Dutton accused Mr Albanese of raising “every possibility … to see what the public want”. “You know, price capping, super tax, distribution of support to businesses and then could they give money out to families, and could they do it in a way that wasn’t inflationary? I think if they had a plan, you would have seen the plan in the budget,” the Opposition Leader told 2GB.

Additional reporting: Perry Williams