The NSW Treasurer has unleashed on the federal government and says his push for a cap on coal prices is needed as time runs out to curb spiralling energy prices.
Matt Kean backs the coal price ceiling as a solution to runaway household bills and Dan Andrews, the leader of Victoria, has called for energy caps more broadly.
The issue was to come up at next week’s national cabinet with federal and state governments discussing the national response to rising bills.
But a government source said the states will be told that only a cap on gas, not coal will be offered.
“They’re afraid of taking on the minerals council,” one source said of the federal position.
Comment is being sought from the government but it has made no public statements on its plans.
That pushes Mr Albanese and at least some premiers on course for a clash on cost-of-living.
But while the states have large powers in energy generation the nature of the national market means there should be consensus between states and Canberra on what to cap and when.
Mr Kean said the NSW government had legal advice that the Albanese government could “fix” energy prices.
“The Australian Energy Regulator made it very clear that if you’re going to use price caps … to dampen electricity prices, then you need to move very quickly,” he told Sky News on Thursday.
“Two months ago the Albanese government said that they would solve this problem and here we are today with not a solution, just an excuse.”
Mr Kean said regulator Clare Savage recently told a meeting of Australia’s energy ministers that “without action before 1 December, it’s very likely that high [wholesale] electricity prices would be baked into the system for the next 12 months”.
The federal government will give some hint on its thinking after next week’s national cabinet. But it is understood to be looking at a “subsidy” to business users at least, given as a deduction on bills.
Assistant Climate Minister Jenny McAllister said “I’m certainly not going to rule things out”.
“It’s pretty clear that all sensible options should be on the table,” she said.
The distinction may seem slight. But given the extreme concerns around inflation, energy policy has become even more fraught.
Wholesale gas prices have spiked to up to three times their levels before Russia invaded Ukraine.
Under the constitution, states wield significant powers on energy – and could even be described as the engine room of investment in renewable generation. That gives them more weight in debates about how it is sold to consumers.
The federal government is reportedly looking to shift the onus for a coal price cap to the states and territories, rather than take a national approach.
Former PM Malcolm Turnbull has said export controls on gas are needed to lower prices – but he said that must come from the states.
Mr Kean said spiking energy prices were a “national problem that requires a national solution”.
“The Commonwealth needs to act on both coal and gas. They have the ability to take steps in the gas industry and the ability to take steps in the coal industry,” he said.
Industry representatives in NSW have pushed back against the idea of a cap, saying it will have little effect on consumer prices but will be disruptive for the sector.
NSW Minerals Council CEO Stephen Galilee said 80 per cent of the state’s coal power stations were paying far less than the global price for coal due to existing contracts.
“A price cap on domestic coal supply will distort the coal market, potentially disrupt existing commercial arrangements,” he said.
“The NSW government needs to carefully consider the full implications.”
NSW Premier Dominic Perrottet said he had discussed the issue with Mr Albanese, ahead of next Wednesday’s national cabinet meeting.
“The Prime Minister and the federal government have come out and said that they will provide solutions to reduce the cost of living across the country and we support that,” he said on Thursday.
“But ultimately, it’s a matter for them to come up with those solutions.”
If NSW was left to foot the bill for a coal price cap, the state’s taxpayers would “need to be compensated”, Mr Perrottet said.
Queensland Premier Annastacia Palazczuk has also flagged a compensation battle if her state loses out due to an energy price cap.
“Let me say very clearly to the federal government – hands off our generators,” she said earlier this week.
The energy regulator’s annual retail market report released this week showed wholesale electricity and gas prices had risen significantly, driven by market volatility
Median market offers for electricity, which flow through to consumer prices, rose by between 9-20 per cent from June to September 2022, the report said.