NSW coal power stations set to receive $500m in price-cap compensation

State government sources’ figure comes on top of estimate of up to $450m for Queensland plant

Coal power stations in New South Wales are set to receive $500m in price-cap compensation, according to state government sources, further fuelling fears payouts are nearing $1bn.

The compensation figure for NSW’s power producers comes on top of an estimate of up to $450m for Queensland’s Gladstone plant, a figure the prime minister, Anthony Albanese, disputed in December before the state’s premier, Annastacia Palaszczuk, appeared to contradict him.

In December the Albanese government legislated a temporary price cap of $12 a gigajoule for gas and $125 a tonne for coal, as part of a package including $1.5bn in electricity price relief to save households about $230 on their power bills.

To encourage continued supply, where coal power producers have actual costs exceeding the $125 price cap – such as pre-existing supply contracts for more expensive coal – the federal and state governments agreed to provide them a rebate.

On Wednesday the Australian reported, and Guardian Australia has confirmed, that according to NSW government sources the figure for that state’s coal power producers will be about $500m.

Recipients would include Australia’s biggest generator, the Origin-owned Eraring power station to Newcastle’s south, along with coal stations at Bayswater, Liddell, Mount Piper and Vales Point B.

A spokesperson for the federal energy minister, Chris Bowen, said “details of the financial assistance are currently being finalised with the NSW government”.

The spokesperson said rebates were only offered where pre-existing contracts for coal are above $125 a tonne or in the “very rare circumstances in which reasonable cost of production exceeds $125 a tonne”.

“These actions are necessary to shield Australian households and businesses from the worst of the energy price spikes and ensure power prices are as low as possible.”

Last month a Queensland government source told Guardian Australia the $450m payout figure for Rio Tinto and its Gladstone power station partners would be “in the ballpark”, although state generators returning in May should limit compensation to six months.

The $450m price tag prompted a backlash from the Greens, with their leader, Adam Bandt, saying “not a single dollar of public money” should go to coal and gas corporations, and from the independent senator David Pocock, who said it “raises serious concerns about the total amount of compensation to be paid”.

“The briefings and information I received suggested that any compensation under this plan to bring much-needed energy price relief for households and small businesses would be minimal and confined to a small number of generators,” Pocock said.

Asked about the reported Gladstone payout, Albanese said: “No, those reports are just that, they are reports … We expect that [for Gladstone] it will be nothing like the sort of figures that I’ve seen in the newspaper.”

But Palaszczuk appeared to confirm the figure was possible as a maximum, responding “yes, we did know” compensation for Gladstone could be “up to $450m”.

“All of that was worked out when we reached the agreement we reached,” she told reporters.

Federal government sources last month said they still expected the total price of compensation to be between $500m and $1bn, figures Guardian Australia reported in mid-December based on a Treasury briefing that included estimates of $250m for NSW producers.

The rate of compensation is being determined by a reconciliation of electricity producers’ actual costs with the $125 cap, made more difficult by the fact costs can vary with a combination of coal at a pre-contracted price or from the spot market.


Paul Karp

The GuardianTramp

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