The federal government is facing resistance from the states over its request for caps on coal prices, as it races to finalise the details of a market intervention to curb skyrocketing energy costs.
As revealed by the ABC, the government is set to cap gas prices at around $12 a gigajoule and force companies to set aside a certain amount of gas for domestic consumption.
But as the nation's leaders prepare to meet on Wednesday, the prospect of capping coal prices is proving more problematic.
New South Wales Treasurer Matt Kean has confirmed the federal government asked the states to impose their own caps on coal, and even recall their parliaments to make any legislative changes required.
Mr Kean said NSW had sought legal advice confirming the Commonwealth has the power, in the constitution, to cap prices.
"They've said that they'd prefer the states to do this … but this is a national problem, that requires a national solution," he told Sky.
"You can't have every state and territory going off and doing their own thing."
When asked directly if he supported a temporary cap on prices, Mr Kean said "if the Commonwealth wants to go down that path, then obviously we'd support it".
However, Mr Kean said it was important that gas and coal prices were capped.
"The price of coal has risen from about $100 to $600 a tonne and that's feeding through to wholesale electricity prices," he said, attributing the price rises to Russia's invasion of Ukraine.
Before Russia’s invasion, in January 2022 coal prices ranged from about US$150 to US$230 a tonne, now they are currently about US$385 a tonne (AUD$574).
"In NSW and Queensland, black coal sets the wholesale electricity price more than 50 per cent of the time," he said.
"So if you're only capping gas prices, you're not doing the job. You're going to still see massive price spikes in energy bills, that's not something we want to see."
The ABC understands the NSW legal advice suggests that if the Commonwealth capped prices, it may be required to provide compensation "on just terms" to coal producers.
Both NSW and Queensland have gone further, raising the prospect of the federal government compensating them for lost royalties.
As he tries to secure a national consensus, Prime Minister Anthony Albanese said on Saturday "there are limits to what the Commonwealth can do on its own".
The October budget forecast power prices would rise by 56 per cent over the next two years, and gas prices by 44 per cent, largely because of Russia's invasion of Ukraine.
Since then, the Commonwealth has been consulting on a market intervention to curb those price rises, promising to outline the details by Christmas.
Editor's note December 6, 2022: This story has been updated to clarify the price of coal in both Australian and US dollars.
