Energy ministers should agree to impose a price cap on gas at about a third of current market offers when they meet on Friday to help ease inflation threats, the head of one of Australia’s largest industry groups has said.
Andrew Richards, CEO of the Energy Users Association of Australia, said current energy prices were “dire”, with contracts being offered for gas at about $35 per gigajoule.
That’s up from about $10/GJ a little over a year ago and compares with average gas production costs at about $5.50/GJ, Richards said.
“What we’re seeing now is a price shock driven by the war in Ukraine,” he said. “I’ve got members in Echuca [on the Murray River in Victoria], who are food processors and are inundated with flood water, saying ‘the floods won’t kill us but the energy prices will’.”
A $10/GJ price cap would be “pretty fair and reasonable”, Richards added. “It keeps our manufacturers in the game, it keeps down the cost of gas and electricity to consumers, and still provides a significant profit for gas producers.”
Pressure on the Albanese government to act to reduce energy prices has been mounting, particularly after this week’s budget revealed electricity prices were up 20% this fiscal year with the prospect of another 30% increase next year.
Inflation figures for the September quarter underscored the wider impacts of prices, with gas prices alone up more than 10% for the period. Without government rebates in some states, such as WA, electricity prices would have climbed 15.6%, the ABS said.
The NSW energy minister, Matt Kean, will raise the issue of energy bill relief at Friday’s gathering of ministers in Melbourne.
France, the UK and Germany could offer intervention examples.
In addition, Kean plans to press his state’s access to “significant financing” from the commonwealth’s Rewiring the Nation plan “in line with the scale of transmission, renewable energy generation and storage development occurring in NSW”.
The ACT’s energy minister, Shane Rattenbury, said his government was “open to the suggestion of rebates”. A clear priority, though, should be “low-income households who are the parts of our community that most need relief from cost-of-living pressures”.
“As we know, there are fossil fuel companies that are making super-profits as a result of these high global commodity prices,” Rattenbury added. “The federal government should introduce a super-profits tax and use the money collected from this to support households.”
His Queensland counterpart, Mick de Brenni, said the emphasis should be on accelerating the take-up of clean energy.
“The best path to secure lower prices is energy independence through more renewable energy, and that’s why the Queensland Energy and Jobs plan is focussed on building wind, solar, batteries and pumped hydro,” he said.
The gas industry, however, rejected the call for intervention in its market.
“This is an energy issue,” Appea’s CEO, Samantha McCulloch, said. “The government needs to look across the energy supply chain, not isolate only one part of it.”
“The best way to put downward pressure on gas prices is to bring on new supply, which can boost energy security, support manufacturing, reduce emissions and ensure the industry can continue to deliver substantial economic benefits to Australians,” McCulloch said.
“Intervention in markets will only act as a handbrake on further supply and demonstrably deliver poorer outcomes for Australian consumers and our international friends and allies,” she said.
The federal energy minister, Chris Bowen, said the meeting would “continue our work on the National Energy Transformation Partnership and the cooperative action between state, territory and the commonwealth government to support the smooth transformation of Australia’s energy sector”.
The treasurer, Jim Chalmers, repeated comments that the Australian Competition and Consumer Commission would be part of the government’s response to “turbulence in the energy markets”.
“I don’t want to unnecessarily limit or pre-empt the outcomes of the work that’s happening now,” Chalmers told Sky News. “Some of the things that might be contemplated in these conditions now wouldn’t have been contemplated in years gone by.”
