An extraordinary plan to cap coal and gas prices in an attempt to rein in power bills next year has enough support to pass federal parliament, with the Greens committing to backing the proposal.
In return, the government has agreed to funding to help households and businesses electrify space and water heaters and cooking appliances to move away from gas and reduce their power consumption longer term.
Federal parliament will be reconvened on Thursday to consider legislation that would allow a temporary price cap and billions in energy bill relief, as the government scrambles to contain a massive expected hike in power bills over the next two years.
Treasury modelling suggests the caps will knock an average of $230 off otherwise expected price rises on energy bills for the average household next year, though bills are still expected to increase by hundreds of dollars.
The caps will be accompanied by $3 billion in energy-bill relief to be jointly paid by the Commonwealth and states and territories to people on income support to help cover those forecast cost increases.
Greens leader Adam Bandt said his party had secured a significant support package for Australians that would help move the nation away from gas faster.
"Energy corporations for too long have been punishing people in this country and power bills have gone through the roof," Mr Bandt said.
"The government has committed to developing a significant package of measures in next year's budget and will work with the Greens in development of those measures."
Mr Bandt said the estimated savings for switching from gas appliances to electric could be up to $1,900 a year for some households, but too many people had been "barred" from those savings by the up-front costs of switching over.
Energy Minister Chris Bowen said the parties had agreed on a "meaningful and substantial" support package, but no dollar figure had been determined.
Mr Bowen said the reforms were "carefully calibrated" to soften price rises next year without damaging industry, which would still be able to make profits through exports.
"These price rises were not brought about by the actions of Australians, they were brought about by [Russian President] Vladimir Putin and Australia being ill-prepared for such a crisis because of 10 years of policy dysfunction," he said.
Concerns over compensation for coal companies
The legislation being introduced on Thursday will allow the federal government to cap gas prices, but coal will have to be capped by the states.
The key coal-rich states, NSW and Queensland, agreed to the measure at a meeting of national cabinet last week.
The cap will also put a hole in NSW and Queensland's state budgets, a hit both said they are prepared to wear — as long as the industry is compensated when operating costs exceed the capped price of coal.
Independent senator David Pocock said although he would support the bill to give people relief, it was "unconscionable" that Australians would have to pay compensation to companies making "record wartime profits".
"Compensation and energy bill relief should be funded through a windfall profits tax," he said.
"I wish the government had the courage to ensure Australians could start getting a fair return on the exploitation of the natural resources we own."
Mr Bowen said instances of compensation to coal companies would be rare.
Dutton warns caps will push prices higher
Opposition Leader Peter Dutton has maintained the planned caps will be damaging to the economy, and argued they will in fact drive up power prices as producers withdraw supply from the market.
"We're already seeing the gas companies talking about restricting supply into the market, and that was entirely predictable," Mr Dutton said.
"If you're going to take more gas out of the market at a time of increasing demand, you're going to see an increase in prices, and we don't support that."
Mr Dutton criticised the government for not releasing the legislation ahead of parliament returning, saying the opposition and other parliamentarians had not had a chance to consider a complicated reform.
He said the government was playing politics with the proposed cap, saying his party wanted to back energy-bill relief, but not if it was tied together with the price caps.
"Bring that on in a separate bill and we will support that," he said.
However, with the backing of the Greens and the commitment of senators David Pocock, Jacqui Lambie and Tammy Tyrrell, the government will not need the opposition's support when the bill is brought before parliament.
