Australia passes law to cap energy prices against ‘wartime whims’

By Angus Watson, CNN

Australia’s parliament passed a new law Thursday capping its domestic gas price and some states’ coal prices, a move the government said would protect consumers from the “wartime whims” of the world.

The move comes as tens of millions of Australians grapple with a surge in utility bills this year, despite the country being one of the world’s top coal and natural gas producers.

“The price of Australian gas for Australian customers should have a connection to the cost of producing it, allowing for a reasonable return on capital, rather than being solely subject to the wartime whims of the international market,” Treasurer Jim Chalmers said in parliament Thursday.

The law caps the domestic gas price at 12 Australian dollars ($8) a gigajoule. It also limits domestic coal prices to 125 Australian dollars ($86) per metric ton in the states of New South Wales and Queensland, which have the largest share of the nation’s total identified coal resources.

The price caps run for 12 months, effective immediately. The government will then have the power to set what it deems a “reasonable price” for energy, though it says it will factor in an “appropriate return on capital” for fossil fuel producers.

The law includes measures to authorize 1.5 billion Australian dollars ($1 billion) in power subsidies for Australian households and small businesses.

Strain on consumers

As with many other countries, energy prices in Australia have spiked this year.

In a report last month, the Australian Competition and Consumer Commission said the typical residential customer was already paying about 300 Australian dollars ($205) more a year for electricity than in 2021, an increase of 23%.

“There are signs this will increase further,” it added.

Without intervention, domestic electricity prices were set to surge 36% in the next financial year, and retail gas prices would likely rise 20%, the ruling Labor government had argued.

Addressing parliament Thursday, Prime Minister Anthony Albanese said the law was meant to respond to “the challenge of the here and now, as a result of Russia’s illegal invasion of Ukraine” and would “help put downward pressure on inflation.”

The Australian fossil fuel industry has rallied against government intervention in the market, arguing it could backfire. Gas producers met with government officials earlier this week, but could not negotiate the removal of new price setting powers by the government.

The Australian Petroleum Production and Exploration Association, an industry lobby, has said the bill’s passage would have a chilling effect on future investment in supply.

These measures would “smash investor confidence and undermine Australia’s reputation as a secure and stable investment destination,” it said on Thursday in a statement.

The-CNN-Wire
™ & © 2022 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

CNN’s Michelle Toh contributed to this report.