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Government to cap wholesale gas prices – is coal next?

Wednesday, November 30th, 2022

The Federal Government looks set to make its first move in its efforts to reduce energy costs, with a plan to cap gas prices.

The Federal Government looks set to make its first move in its efforts to reduce energy costs, with a plan to cap gas prices. But doing the same with coal prices won’t be so easy.

The ABC has reported that the Government will likely cap wholesale gas prices at around $12 per gigajoule for commercial and industrial customers, demand a guaranteed domestic gas supply, and enforce a mandatory code of conduct.

Details of the plan are expected to be made public early next week.

With Australia’s electricity prices tipped to skyrocket 56 per cent by the end of 2023, the Federal Government has long signalled it would move to drive down costs. Capping gas prices is considered the first of those efforts, while a similar – though more complicated – cap on coal prices is also being considered.

Any move to cap the price of coal, however, will be met with strong resistance.

Following news of the plans on gas prices, Queensland Premier Annastacia Palaszczuk has already indicated she will oppose a similar cap on coal used by state-owned energy companies.

“Let me say very clearly to the Federal Government: hands off our generators,” she said on Tuesday.

“There is no way that Queensland is going to sacrifice the returns that we are able to provide back to Queenslanders.”

Unlike changes to wholesale gas, any changes to coal pricing would require the support of coal-producing states like Queensland and New South Wales.

“If we think the solution lies within the states’ jurisdictions, then undoubtedly we’ll talk to them,” Federal Resources Minister Madeleine King said.

“Gas and coal are going up way too fast for our economy to withstand if they remain unchecked.”

But Palaszczuk’s comments seem to indicate that state support won’t come easily.

The Minerals Council of Australia (MCA) has also expressed its opposition to a cap on coal prices.

The MCA, whose members include major coal players BHP, Glencore and Whitehaven, has said it will launch a multimillion-dollar advertising campaign against the proposed cap on coal prices.

MCA chief executive Tania Constable has indicated her organisation is “already having discussions with the government” about potential interventions and an ad campaign would be about “standing up for families, standing up for small businesses across regional Australia”.

“We can’t afford to see jobs go in regional Australia,” she said last week. “When bad policies emerge, the mining industry is going to look at those individually and as a whole and what sort of impacts they’re having.”

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