The federal government passed a bill on December 15 that caps wholesale gas prices at $12 per gigajoule for the next twelve months. Labor will also support New South Wales and Queensland governments limit wholesale coal prices to $125 a tonne.
The measure is an attempt to limit fossil fuel corporations' price-gouging: they have made record profits since the Russian invasion of Ukraine began.
According to energy minister Chris Bowen, 96% of gas sold in 2021 was for less than the new $12 price cap. The average price was $9.20. By contrast, short-term gas prices on Australia's east coast averaged $26 in the third quarter of this year.
This price difference is a result of big companies' profiteering since the cost of production has not substantially increased.
According to The Australia Institute (TAI), the gas and coal companies have made up to $85 billion in “extra” windfall profits in the last year from export sales.
“Windfall profits to coal companies in 2021-22 were between $39 billion and $45 billion” and “gas exporters reaped windfall profits of between $26 – $40 billion”, TAI said.
The government secured the Greens' support with a promise of a “package of support to [help households] switch to high quality electric appliances that will lower power bills for people, including low and middle income households and renters”.
The details of this package will be worked out in the lead up to next year’s budget. The Greens claim that “households could save $1,900 per year by switching from gas appliances alone and up to $3,450 per year by fully electrifying”.
In the lead up to the vote, the Greens were arguing against government compensation to the fossil fuel giants. “The greedy coal and gas corporations should be compensating people, not the other way around,” Greens leader Adam Bandt said on December 12.
“It's a bad day to be a greedy, tax avoiding gas corporation,” Bandt said after the bill passed, adding, “the writing's on the wall for gas”.
However, large domestic industrial operations powered by gas will be some of the biggest beneficiaries of the new policy. This, combined with the fact that most gas industry profits come from exports, mean that the package is more like a slight clipping of their wings than a death blow for the gas industry.
The final package does not include direct subsidies for the fossil fuel companies, but it is unclear if the deal with NSW and Queensland will involve state subsidies to coal companies.
Federal Labor will allocate $1.5 billion to the states to assist “vulnerable” people and “small businesses” with their power bills from April. State treasurers will work out details about who will benefit from this next year.
Prime Minister Anthony Albanese acknowledged on December 9 that household power bills will continue to rise. “The reality is that due to global circumstances and a decade of energy policy mismanagement, Australians will continue to still see high energy prices for some time.”
He claimed that, despite the expected increases, households will be $230 better off than if his plan didn’t pass.
Bandt said that “under Labor’s scheme power bills will still keep rising, so the Greens will keep pushing for a 2 year bill freeze instead so people have more cash in their pockets to meet the rising cost of living”.
The gas industry is complaining about the package, in particular a long-term “reasonable price provision” that will come into effect after the temporary price cap expires.
Bowen indicated that this measure simply ensures the gas industry could “not expect to charge its high export prices in the domestic market”.
The Coalition voted against the package.