Australia’s large gas producers face price caps or export limits as pressure mounts on the federal government to fulfil its election promise to bring down energy costs and boost manufacturing, after Treasurer Jim Chalmers ruled out any new taxes or power bill subsidies.
Household power bills have risen 25 per cent, or $300, on average since April, Gina Cass-Gottlieb, the new head of the Australian Competition and Consumer Commission told a parliamentary committee on Tuesday, while the cost of natural gas has also risen sharply.
Treasurer Jim Chalmers warned gas producers that he wants to see tougher measures to force better outcomes for the economy.Credit:Alex Ellinghausen
A global energy crunch, being exacerbated by international bans on Russian coal, oil and gas exports, has pushed up energy costs across the globe and Chalmers said Treasury had advised him that power prices were expected to keep rising for up to nine months.
Higher energy costs loom as a major political risk for the federal government, which promised during the election campaign to cut power bills by $275 by 2025 and to grow manufacturing with a $15 billion National Reconstruction Fund.
Chalmers said on Tuesday he was working with Resources Minister Madeleine King, Industry Minister Ed Husic and Energy Minister Chris Bowen to bring down gas prices and warned producers that he wants to see tougher measures to force better outcomes for the economy.
The treasurer said, “more can be done” through tougher regulation. The government is reviewing the Australian Domestic Gas Security Mechanism, known as the “gas trigger”, which enables the government to redirect gas exports into the local market.
Household electricity bills had risen 25 per cent, or $300, on average since April, the Australian Competition and Consumer Commission says.Credit:Paul Jones
“The way that our gas industry regulation is set up has not been delivering the kinds of outcomes that we want to see. If you recognise that, and I do, then you recognise that if more can be done, it should be done,” he said.
King has warned the gas trigger could be changed so it can be pulled more frequently than just once every 12 months, as is currently permitted.
Chalmers has repeatedly ruled out new taxes on energy companies or an increase in the existing Petroleum Resources Rent Tax, measures which could have either increased the cost of exporting gas to increase and lower domestic supply or generate revenue to support local buyers.
He also said on Tuesday he would not be “spraying cash around” to subsidise the cost of power bills, which would add to inflation.
Husic issued a warning to east-coast gas companies on Tuesday, which he said faced a choice to be part of “team Australia or they can be part of team greed”. He said the government could impose regulations to cap prices for gas being sold to local manufacturers or reserve gas for the local market.
Australian homes and businesses are set to face more dramatic increases in their electricity bills next year because of ongoing rises in wholesale electricity prices. Alinta Energy, the nation’s fourth-biggest power generator, warned retail power prices would increase by at least 35 per cent in 2023.
“There are real issues around energy pricing that we’ve got right now,” Alinta chief executive Jeff Dimery told the Australian Financial Review’s energy summit in Sydney on Monday.
Origin Energy, the nation’s second-largest generator, agreed that retail tariff increases of around 35 per cent next year were probable.
“Based on current wholesale prices, those orders of magnitude sound familiar to me,” Origin chief executive Frank Calabria said.
Opposition Leader Peter Dutton said families and businesses would suffer unless the government moved to cut prices, noting the government was elected on a plan they said would reduce power prices.
Australian Industry Group chief executive Innes Willox said financial assistance would be needed by the most vulnerable businesses and households to get through the coming two years.
“Government can also help through delivering planned investments and upgrades in the electricity system and policies that encourage energy user upgrades that reduce their underlying vulnerability through information, finance, and supply chain co-ordination,” Willox said.
Tim Gould, the chief economist of the International Energy Agency, said higher electricity prices were almost entirely being driven by higher costs of fossil fuels including coal and gas.
“There’s been a vigorous debate in parts of Europe, with some saying it’s all a result of expanding renewables and net zero policies,” Gould said. “In our perspective, more than 90 per cent of the increase in electricity costs worldwide has come from higher underlying prices for fuels.”
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