‘Zero space for delay’: Labor hunts for curbs on power price surge

Treasurer Jim Chalmers has cleared the ground for new curbs on energy companies to prevent a price shock that could add $1300 to household bills over the next two years as union chiefs demand rapid action from Labor to stop the surge revealed in Tuesday’s budget.

Chalmers signalled moves to “take some of the sting out” of the price hikes and did not rule out price caps on energy bills or new curbs on gas exporters after the budget forecasts fuelled a dispute over Labor’s pledge at the last election to cut power bills.

Treasurer Jim Chalmers said it was too late to stop a 20 per cent increase in electricity prices already taking effect.Credit:Alex Ellinghausen

Australian Workers Union national secretary Daniel Walton backed the government on its budget agenda but warned there was “zero space for delay” on the energy crisis and called for an immediate cap on gas prices to save thousands of jobs at companies that could not afford the higher prices.

Opposition Leader Peter Dutton seized on the energy forecasts to slam Labor for promising lower energy prices at the May election with modelling that claimed a $275 cut in household power bills by 2025.

While Prime Minister Anthony Albanese named the war in Ukraine and its impact on energy supplies as an event that changed the outlook from the modelling done last year, Dutton said Labor had continued to cite the $275 cut after the war began in February.

“The Prime Minister looked the Australian public in the eye and he’s misled them,” Dutton said.

“I think people are right to feel disappointed, let down and, frankly, worried about what the next couple of years will hold under Labor.”

But Chalmers said it was too late to stop a 20 per cent increase in electricity prices already taking effect and made no promise to halt a 20 per cent rise in gas prices this year.

“Some of these price increases are already flowing,” he said.

“If there is something that we can sensibly do on energy beyond the substantial steps that we have already taken, if we can do that to help take some of the sting out of these price rises, then obviously we’ll consider it.”

Asked if he was open to putting price caps on energy, Chalmers said: “I don’t want to, here, nominate a preferred path – it would require a lot of consultation with colleagues and with other levels of government and so that’s the reason why I’m not prepared to be more specific.”

Finance Minister Katy Gallagher said more intervention “has to be done” because the challenge was probably the most significant issue the government faced after the budget.

ACTU president Michele O’Neil said a “super tax” on gas exporters should be considered because it could fund rebates to households.

“It’s really important to see the super profits tax considered and think of how that can be used to provide some relief,” she said.

With pressure mounting on Labor from its own support base, Energy Minister Chris Bowen will meet state and territory counterparts on Friday to discuss the shift to renewable energy when the government is promising lower prices from solar and wind power.

The AWU wants a meeting of manufacturers, industry groups, consumers groups, unions and gas companies in early November to build the case for intervention by political leaders through the Australian Competition and Consumer Commission or the Australian Domestic Gas Security Mechanism (ADGSM), the “gas trigger” that can stop exports.

“If we don’t get action in the next few weeks, we’re going to see factories close,” said Walton.

“Yes, there is a stack of long-term things the government should look at, but, right now, what we need is for the ACCC, or the ADGSM, or both, to get real power to immediately cap gas prices.

“If the government makes this move now, everyone wins. The gas companies may whinge but they’ll be absolutely fine and still enjoy mega profits.”

The budget forecast a 20 per cent increase in retail electricity prices on average nationwide in late 2022 and a 20 per cent increase in retail gas prices this financial year.

It forecast a further 30 per cent increase in retail electricity prices on average nationwide in the year to June 2024 and a further 20 per cent increase in retail gas prices in the same year.

Due to compounding, the electricity increase would be 56 per cent over two years while the gas increase would be 44 per cent over two years, but the government could intervene before the full impact is realised.

Average household electricity bills were $1,434 last financial year, according to the most recent ACCC report. A 56 per cent increase would add $803 over two years.

Average household gas bills were $1,128 nationwide, according to the latest analysis by the Australian Energy Regulator based on advice from Frontier Economics. A 44 per cent increase would add $496 over two years.

Victorian customers would be hit much harder by the gas price spike than others, given the state’s gas usage per customer was 49,799 megajoules per year compared to only 18,384 in NSW and 7,238 in Queensland in AER reports.

The Australian Energy Council, whose membership includes power giants AGL, Origin and EnergyAustralia, said retailers’ input costs were high due to the soaring price of coal and gas and warned against price caps that could force companies to shut down and force prices for consumers up even higher.

“It is these input costs that are high, not retail margins, which the ACCC reported made up only 3 per cent of the bill at the end of last year,” said council chief executive Sarah McNamara.

“While we know customers are doing it tough right now, if the regulator sets the price too low, it could trigger a wave of retailer exits from the market, impacting customer experience, and resulting in higher prices.“

Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch said expanding gas production was the best way to reduce gas prices – a message to political leaders to back projects like the Narrabri gas field in regional NSW.

But McCulloch warned against market intervention by saying “ever-changing policy” was a risk to investment and supply.

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