Opposition Leader Peter Dutton accused the government of breaking an election promise to cut bills by $275, which was a forecast for 2025 in Labor’s climate policy.
Dutton said the national cabinet deal did not do anything to increase gas and other power supplies and would not stop electricity prices going up.
“I think we’re going to look back in 12 months time realising that this was a catastrophic decision made by a very bad government,” he said.
The price controls are a drastic new measure to shield Australians from a global energy shock, imposing a cap of $125 per tonne on coal – half the rate on the spot market – and about $12 per gigajoule on gas for electricity generators and other big energy users.
The October 25 federal budget forecast a 56 per cent increase in electricity bills over the next two years and a 44 per cent increase in household gas bills over two years.
Federal officials estimate the price controls on gas will mean prices rise 18 per cent this year and 4 per cent next year, halving the forecast rise because the compound effect would be a 23 per cent increase over two years.
The increase in electricity prices will be harder to change because regulators have already set the default market offer for customers for this financial year, but the officials think the increase next financial year will be 23 per cent rather than an earlier forecast of 36 per cent.
As a result, the compound increase in electricity prices over two years would be 47 per cent rather than 56 per cent, based on calculations by this masthead based on the federal government’s adjusted forecasts.
Crucially, the change to the price forecasts is based on the impact of the new caps on coal and gas before the additional impact of the $1.5 billion in assistance for households.
Canberra and the states are yet to agree on how those payments will be made, but the $1.5 billion would amount to about $250 per household if it went to all of the six million recipients of income support under federal social security programs.
Treasurer Jim Chalmers will negotiate the details with state counterparts and wants them to match the federal money, something most can do because they already offer bill subsidies for vulnerable customers.
A couple on the Age Pension in NSW, for instance, receives a $285 state subsidy on their electricity bill and this could be doubled under the new deal to offset any increase in prices.
While the big coal-producing states of NSW and Queensland will impose the price controls on coal for domestic customers – while leaving export contracts alone – the gas controls will be legislated by the federal government and will require parliament to meet.
NSW is expected to pass new laws next year to enforce the price cap on coal, while Queensland is expected to use existing regulations to take similar action.
Albanese acknowledged the concerns in NSW about the impact of the coal price cap on the cost of production – an issue for coal-fired power generators that pay contract prices above the cap – and said the Commonwealth would provide financial support.
Queensland and NSW raised concerns about the loss of royalties from coal, but both have accepted the federal government will not compensate them for this. The cap does not affect the 85 per cent of coal production Australia exports.
The Queensland government expects the outcome to include more federal support for two pumped hydropower projects it wants to build, as well as funding for a ring-road in Rockhampton.
The national cabinet meeting, held online because Albanese is still isolating after a positive coronavirus diagnosis on Monday, concluded after 90 minutes of talks that agreed on the $1.5 billion in federal assistance while leaving further meetings to decide the mechanism to deliver the help.
The NSW government pushed for a rebate scheme to add federal assistance to existing state programs that deliver payments to retailers and enable them to deduct the amounts from electricity bills before they go to customers.
That demand triggered another round of discussions with other states about similar measures elsewhere, complicating the talks.
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