NSW Treasurer hopes to even the playing field with coal scheme

Thermal coal companies in NSW will need to set aside between 7 and 10 per cent of their output for the domestic market to spread the financial impact of price caps imposed to push down the cost of electricity, but the decision has been met with scepticism by the industry.

NSW Treasurer Matt Kean said on Thursday the expansion of the domestic reservation arrangements would even the playing field with those coal producers that are abiding by the coal price cap. The measures are only temporary and are expected to last until 2024.

NSW Treasurer Matt Kean has said the expansion of the domestic reservation arrangements will even the playing field among coal producers.
NSW Treasurer Matt Kean has said the expansion of the domestic reservation arrangements will even the playing field among coal producers.Credit:Dominic Lorrimer

He said it was fair that Australian coal producers provide energy for consumers at domestic prices. “This coal cap scheme will see NSW doing our part at the request of the Albanese government to contribute to the national solution of this national problem,” he said.

The NSW government committed to a $125-a-tonne cap on the price of coal sold to local power providers as part of the federal government’s interventions in the energy market to keep a lid on prices for households and businesses.

In December last year, the Albanese government agreed with the states and territories on one-year price caps on gas and black coal in an attempt to lower electricity prices. The decision only applied to some energy producers.

Energy giant Whitehaven Coal said some of its staff met NSW government officials on Wednesday for an internal briefing on the policy that would expand the number of producers included in the price caps.

“The company is currently reviewing the potential implications of an expanded scheme and will continue to engage with the NSW government and update the market as appropriate,” a statement from Whitehaven said.

NSW Minerals Council chief executive officer Stephen Galilee said the coal price cap would have no impact on electricity prices.


“The NSW energy minister’s coal price cap is a clumsy, politically motivated market intervention designed in haste, with little or no consultation,” Galilee said.

“Extending the policy to coal producers not currently involved in domestic coal supply is a radical change of approach that highlights how extremely rushed this policy process has been.

“The price cap policy undermines the reputation of NSW as an investment destination, and as a trading partner and supplier to our critical export markets overseas. It will threaten future investment in NSW across the resources and energy sector, and more broadly.”

In NSW, there were already coal reservation arrangements in place under which some producers would be required to carve out a large portion of their supply for domestic electricity generation while others were exempt. These are expected to be applied in April.

But under Thursday’s announcement, most coal producers in NSW will be required to earmark about 7 to 10 per cent of their coal for domestic electricity generation. The state government is consulting relevant companies with the new orders expected to come into force at the end of January.

“I know those currently providing coal for the local market will appreciate that companies enjoying super profits on the back of the war in Ukraine will now do their part for the domestic market,” Kean said. “These new arrangements will help even the playing field among coal producers.”

The new reservation orders follow days of back and forth on the price cap on gas, with gas producers found to be suspending new contracts with retailers until they have more detail about how the price cap works.

With AAP

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