Fin Review

Gas project hits pause as NSW introduces huge fines for coal companies

Samantha Hutchinson, Mark Ludlow and Angela Macdonald-Smith

Dec 21, 2022 – 6.29pm

Save

Share

The Albanese government’s ambitious plan to drive down energy bills through price caps on coal and gas will come into effect in January after NSW MPs passed critical legislation on Wednesday paving the way for strict price caps on coal and compensation for suppliers and producers.

The NSW legislation empowers the state government to cap the coal price at $125 a tonne and forms a central of the federal government’s plan which has also slapped a cap on gas prices at $12 a gigajoule and imposed a mandatory code of conduct for the gas market. The federal plan also includes provisions to rollout of power bill support for welfare recipients

The NSW Parliament has passed legislation permitting the state to cap the price of coal sold to local energy producers at $125 a tonne, in a critical step which paves the way for an Albanese government plan to lower energy bills for households and businesses.

But the smooth passage of the legislation through NSW Parliament on an emergency sitting day organised within days of Christmas was almost derailed after the NSW Opposition pounced on a recalled parliament to file a raft of last minute motions to debate renters’ rights and rental affordability.

The surprise debate blindsided the government and caused consternation behind the scenes about whether the Premier would be able to join the Prime Minister at the press conference where the pair were to officially announce a $5 billion funding injection from the federal government to build critical energy infrastructure.

As the Prime Minister spoke, coal mining and coal-fired power generators in the region welcomed the plan, even as they downplayed the impact on the region which they said would continue operating as normal

Nearby coal mining outfit

But the power station could receive some compensation from the plan, chief executive Greg Everett said.

Early briefings from the government on the legislation have led Delta executives to believe the generator could receive compensation for the 50 per cent of its coal that it buys from mines other than its own, which price coal above the $125 a tonne threshhold. Vales Point relies on coal inputs from Centennial Coal and others, many of which have higher production costs than its own Chain Valley mine. In the event a coal contract prices the coal above the $125 a tonne threshhold, the power station will receive compensation for the difference.

Even so, Mr Everett had mixed views on the measures, which he said could bring some temporary changes in energy prices while also potentially lowering supply in the long run.

“We definitely don’t want to see it go beyond calendar 2023,” Delta chief executive Greg Everett told The Australian Financial Review.

“If you fix the price you’re going to end up with less supply and more demand and its important the government processes approvals for new coal and new gas supply ... the high price is signalling the government’s need to approve more supply.”

At the Vales Point Power Station which is owned by Delta Electricity and is part of Delta Coal, power station managers James McAllister and Chris Rogers said they were proud of the role the power station played in the community, where it employs a workforce of more than 500 people.

“It’s a good feeling knowing you are going to work every day to keep the lights on,” Mr McAllister told The Australian Financial Review. Mr Rogers agreed. “It’s difficult to explain what you do as an engineer but it’s a lot simpler when you say that what you do is what keeps people’s power turned on.”

Really - DYOR