States getting hot under collar as fight with feds escalates

The chances of a deal being brokered on price caps before next week’s meeting of national cabinet – if this is the path that Anthony Albanese is locked into pursuing – is looking slimmer by the day, writes Simon Benson. Picture: NCA NewsWire / Gary Ramage

Anthony Albanese’s pledge of lower energy prices is now looming as a pitched and parochial battle between the commonwealth and the states.

And the chances of a deal being brokered on price caps before next week’s meeting of national cabinet – if this is the path that the Prime Minister is locked into pursuing – is looking slimmer by the day.

Unless of course the federal government is prepared to stump up billions of dollars in compensation to be paid to coal producers. The NSW and Queensland governments have made it clear that they will not sign up to coal price caps of their own without an iron-clad guarantee from the commonwealth about funding

And there is no signal yet as to how much that might cost, or what the federal government might be contemplating.

On the other hand, the South Australian Labor government is saying “stay out of gas”.

But for a price cap to work, Albanese must do both.

NSW and Queensland have now been asked by the commonwealth to be out on standby to recall their own parliament for an extraordinary sitting before Christmas to pass price cap legislation along with the federal parliament.

This is an extraordinary move.

And it is putting the cart before the horse.

The states are hardly going to agree to do that until they see some detail. Privately, their view is that the federal government has had since October – when the soaring price spike was revealed in the budget – to come up with a strategy but it was only this week that they received a limited briefing on options.

The counter-threat from the federal government is unless the states address coal prices, then it won’t act on gas.

But rather than a price cap on gas, it appears now that it is leaning toward a model that incorporates a price mechanism on gas within a mandatory code of conduct.

This is now an issue of political brinkmanship between the federal government and the states with a hard deadline set by Albanese to have a package signed before Christmas.

The complexity of what the Albanese government is now facing was reinforced by Woodside Energy’s threat on Thursday that it would withhold new gas investment on Australia’s east coast if it went ahead with any intervention that amounted to cutting prices in the domestic market.