PERTH (miningweekly.com) – Parliament has passed the federal government’s Energy Relief package, which will put a an initial 12-month cap on coal and gas prices as the government tries to reign in skyrocketing energy prices.

The Energy Relief plan will include a temporary price cap of A$12/gigajoule of uncontracted gas for a period of 12 months, a 12-month price ceiling on domestic coal of A$125/t in New South Wales and Queensland, and A$1.5-billion in targeted bill relief for businesses and households.

The plan also pledges long-term action to secure Australia’s energy future, including a new Capacity Investment Scheme and the continuing roll-out of projects under the Rewiring the Nation Fund.

Speaking ahead of the vote, Prime Minister Anthony Albanese told Parliament that the legislation of the Energy Relief package was urgent, given the ‘wasted decade’ of neglect the national energy grid had experienced under the previous government.

“This plan is a combination of immediate action – but also future reform.

It recognises the challenge of the here and now, as a result of Russia's illegal invasion of Ukraine.

“We need to act now, though, to deal with this crisis, to keep Australians in work, to support families, but also to look to the medium-term to make sure we do secure our energy future. And that is what we will be doing.

“Making sure we get the cheapest and cleanest form of energy – renewable energy – to be able to power into the grid through the projects that we announced and will continue to announce around Rewiring the Nation.

“Together with the National Reconstruction Fund, this is about also making sure we can makes things here again,” Albanese said.

The Australian Petroleum Production & Exploration Association (Appea) said on Thursday that Australian businesses should be alarmed by the passing of the Energy Relief package, saying it up-ended a functioning market with virtually no consultation, and within just days of being announced.

“The laws, which passed the parliament this afternoon, give the government command and control of the market but fail to address the underlying causes of higher domestic gas prices – declining supply and increasing demand for gas for power generation,” the industry body said in a statement.

Appea also warned that these measures would also smash investor confidence and undermine Australia’s reputation as a secure and stable investment destination.

CEO Samantha McCulloch said the industry had worked with the Government to guarantee supply into the east coast domestic gas market, including through a Heads of Agreement backed by a voluntary Code of Conduct.

These mechanisms, agreed in September, were already underpinning long-term supply contracts at competitive prices. They should have been given a chance to work to bring on new supply and reduce prices in a sustainable way, rather than reaching for heavy-handed approaches that unravel two decades of gas market reform.

“We share the Government’s objective of ensuring that energy prices remain affordable and support targeted relief to households and business. Sustained high domestic energy prices are in no one’s long-term interest,” McCulloch said.

“But this intervention in the market will have the opposite effect of that intended. Price caps and ongoing regulation of prices will undermine the case for investment in new supply and ultimately lead to higher prices and greater problems down the track.”

The cap on coal and gas prices will be reviewed by mid-2023.

The government is also proposing a mandatory code of conduct for the wholesale gas market that includes a reasonable pricing provision, accelerating the introduction of the Australian Domestic Gas Security Mechanism (ADGSM), and boosting resources for the Australian Competition and Consumer Commission (ACCC) for implementation, monitoring and enforcement.

The code will apply to contracts between gas producers and their customers in the east coast market, and the government will undertake consultation on the scope of the code and whether it should be expanded to wholesale contracts sold by other market participants. The ACCC will continue to closely monitor and report on the behaviour of all market participants, including energy retailers, and take enforcement action where required to ensure competition across the market.

The code will include a provision for reasonable pricing. This will provide a basis for producers and buyers to negotiate domestic wholesale gas contracts based on guidance on reasonable pricing from the ACCC, which will reflect the long-run costs of domestic production and an appropriate return on capital. If producers and buyers are unable to agree, they may seek a binding arbitration determination.

Stakeholders had until February 7 to comment on the mandatory code of conduct before it will be put before Parliament.