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Albo's Coal and Gas Price Cap and Financial Aid proposal

Craton

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Apology if this has been posted/discussed elsewhere but Albo's proposed coal and gas price cap along with financial aid will most assuredly dampen SP is those stocks affected, e.g ORG.

So, is it a done deal and will the proposed pass through parliament?
The market seems to think so.

Australia To Impose A Cap On Coal And Gas Prices

By Irina Slav - Dec 09, 2022, 2:23 AM CST

Australia has joined the club of countries imposing price caps on energy commodities with a ceiling on gas and coal prices, announced today by Prime Minister Anthony Albanese.

The price of natural gas will be capped at $8.15 (A$12) per gigajoule and at $85 (A$125) per ton of coal and the cap will be in effect for a year. The government will provide additional support for coal miners who have higher costs than the cap, the Prime Minister also said.

"Extraordinary times call for extraordinary measures, and we know, with the Russian invasion of Ukraine, what we've seen is a massive increase in global energy prices," Albanese told media, as quoted by Reuters.
The price cap comes in spite of warnings from the gas industry that this would discourage investments in future supply. In addition to the cap, the government will provide financial aid to households and businesses to the tune of $810 million (A$1.2 billion).

Below is from the ABC

Coal and gas price caps and whether they'll lower your energy bills explained​

By energy reporter Daniel Mercer
Posted Sat 10 Dec 2022 at 6:43amSaturday 10 Dec 2022 at 6:43am, updated Yesterday at 11:12am

When historians look back at 2022, one of the defining features will surely be the sheer scale of an energy crisis almost unparalleled in modern times.
From the start of the year, when resurgent northern hemisphere economies put a rocket under coal and gas prices, to Russia's invasion of Ukraine that sent those prices into orbit, the past year has been a wild ride.

In a bookend to the drama, the national cabinet of federal and state leaders thrashed out a deal on Friday to shield consumers from the worst of the energy price fallout.

What's in the deal and how it will flow through the system will be top of mind for wary consumers, many of whom will be heading into 2023 nervous about the cost of living.

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Gas plays a hugely influential role in setting electricity prices, and is a crucial input for many industries.(Supplied: AAP)

What's in the plan?​

Headlining the plan hammered out between Prime Minister Anthony Albanese and state leaders are caps on wholesale gas and coal prices.

For gas, producers will be unable to charge any more than $12 a gigajoule for the product they sell – a massive step down on the average price so far this year of $41 a gigajoule.

The price cap for coal will be similarly restrictive, at $125 a tonne for uncontracted thermal coal sold ostensibly out of New South Wales and Queensland.

A further element in Thursday's package is $1.5 billion in Commonwealth funding – matched by the states – for vulnerable customers.

The money, which will be distributed by the states, will be delivered in the form of reduced bills rather than cash handouts, amid fears the latter would fuel runaway inflation.

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Prime Minister Anthony Albanese says an energy relief package is aimed at "shielding" consumers.(ABC News: Ian Cutmore)
Finally, Mr Albanese said the federal and state governments would try to tackle power prices in the long-term through the deal struck on Thursday to underwrite "firm" capacity, such as batteries and pumped hydro that could back up intermittent renewable energy sources.

He noted the federal government was also aiming to fast-track high-voltage power lines needed to connect new green energy capacity through its $20 billion Rewiring the Nation scheme.

Will the deal work?​

While the details of the announcement were welcomed by consumer groups, don't expect the relief package to give you cheaper power bills.

Coal and gas prices to be capped​

The government expects its intervention into the energy market will spare the average household from $230 in otherwise expected energy price hikes next year, as national cabinet agrees to impose price caps on gas and coal.
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Read more
Realistically, the suite of measures agreed by national leaders will simply take some of the sting out of expected price hikes for most consumers over the coming months and years.

But that's still something to cheer for the average household, small business or industrial energy user.

Typical household power bills have already risen between 20 and 30 per cent in 2022 and, as has been well documented, they were forecast to rocket another 56 per cent over the next two years.

By capping the price at which wholesale gas and black coal can be sold, governments are effectively putting a lid on the pressure building up within the supply chain, at least in the short term.

When a gas producer, for example, puts a term sheet in front of a buyer, they will be prevented from offering a price greater than $12 a gigajoule – significantly more than historical prices of about $5 a gigajoule, but miles below average prices this year.

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Coal is still the mainstay of Australia's electricity supply, and its price has been rocketing.(Supplied: david_a_l/Flickr.com, CC BY NC ND 2.0)
It's a similar story for coal, which has been fetching record prices of more than $300 a tonne in 2022.

Contracted coal and gas, which typically make up far greater volumes than uncontracted supplies, will be unaffected by the announcement.

Crucially though, the price caps will take much of the volatility and high prices out of the wholesale market, which is usually a benchmark for longer-term deals.

When will I see it in my bill?​

The full effects of the changes are unlikely to be felt for some time – possibly not until mid-next year.

But in the short term, there are hopes, even expectations, that the intervention by governments will flow through from February.

That's when energy retailers are required to spell out their latest benchmark prices – known as default market offers – to consumers.

Many – if not most – other prices are set using the default market offers as a reference, so pushing those lower than they otherwise would be sends a powerful signal.

On top of this, the "targeted relief" to be provided by the Commonwealth through the $1.5 billion of extra assistance means millions of vulnerable consumers will be given additional help.

Among them are pensioners, the unemployed and poorer families, although the details of how the states will distribute the federal money are yet to be worked out.

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Big coal-fired plants such as AGL's Bayswater in New South Wales are retiring in rapid succession.(Supplied: AGL)
Mr Albanese said inaction would have all but guaranteed the whopping price rises forecast in the Federal Budget for 2023 and 2024.

Instead, reports suggest bills will increase by $230 a year less for the average household than they otherwise would have.

"What it will do is put downward pressure on those increases which were envisaged," Mr Albanese said.

"If we sat back and didn't take action, then we know that impact would occur as was predicted by Treasury."

How will this affect producers?​

The immediate reaction from the Australian Petroleum Production and Exploration Association (APPEA) – the lobby representing oil and gas producers – was one of swift condemnation.

APPEA warned the intervention was a radical one that would "smash" confidence in Australia as an investment destination for the industry.

Chief executive Samantha McCulloch argued the package would ultimately be counterproductive by choking off new supply and pushing up prices for users.

She argued it also sidelined an agreement with the federal government for producers to sell more gas domestically.

"A gas price cap will force prices higher for households and businesses because it will kill investment confidence and reduce future supply," Ms McCulloch said.
"Less gas will ultimately mean higher prices while threatening Australia's energy security, our emissions reductions goals and the enormous economic benefits that the industry delivers for Australians.

"This heavy-handed, radical intervention has been conducted with no prior consultation with industry to consider specific measures and warn of potential risks to Australia."

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Australia is one of the world's biggest gas producers, but most of its output is exported.(Supplied: Woodside Energy)
Critical to the industry's concerns is the duration of the price caps.

At this stage, Mr Albanese insists the measure will only stay in place for 12 months to help Australia ride out the worst of the global energy crisis.

But the federal government is already facing questions about whether it will need to be extended, fuelling fears among producers.

What about long-term impacts?​

Though the Prime Minister was at pains to say the governments' actions were for "extraordinary times", the pressure to keep a lid on energy prices is unlikely to fall any time soon.

Experts generally forecast the upheaval in energy markets to last for years, as the transition away from fossil fuels towards renewable sources heats up.

As that happens, ageing – and in some cases even new – coal and gas-fired power plants will exit the market as their business models and equipment are wrecked by the competition.

But, of course, that heightens the pressure on everybody – particularly governments – to ensure the replacement wind, solar, battery and pumped hydro capacity is built in a timely way.

There's also a growing urgency around the need for the transmission lines that will be required to take the electricity from the new sources of power, often in sunny, windy regional areas, to where it's used, often vast distances away in the cities.

None of these things can be done cheaply or easily.

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The rise and rise of intermittent renewable energy is playing havoc with coal-fired generators.(Supplied: Michael Abrahams)
And therein lies the monumental challenge for the people running the country, not to mention the investors needed to stump up the money, the construction firms needed to build the assets and the power industry that'll have to operate them.

In the short-term, Mr Albanese and state leaders are seeking to shift some of the costs of bill relief on to the producers.

Longer term though, consumers cannot expect to be shielded from all of the costs arising from the once-in-a-century overhaul of the grid.

What's more, the increasing rate of government intervention in the energy market is a sign of things to come.

Expect more of the heavy lifting to be done by the state – and taxpayers, by extension.
Ultimately, many observers argue Australia's abundant supply of cheap renewable energy will put a permanent lid on power prices.
The road to that destination will be full of potholes.
And it may take some time to get there.

Posted 10 Dec 2022 10 Dec 2022, updated Yesterday at 11:12am
 
As a broad comment, caution is required in assessing the impact on any given company.

Firstly because it applies only to domestic market sales and not to exports. Bearing in mind that the domestic market is far smaller than the scale of exports.

Then it gets complex.....

A lot of coal isn't tradeable either due to its quality or simply lack of physical transport infrastructure to enable it to be exported. It never was exposed to international pricing and is instead being sold under contract to whoever. The impact there is zero.

There are situations where the coal mining company and the coal consumer are the same. On a large scale AGL owns the Loy Yang mine and itself uses about 65% of its output with the remainder sold to electricity rival Alinta under long term contract. Only a very minor amount is sold to anyone else. There are other examples like that in other states too.

Even where coal is tradeable, a lot is tied up under longer term contracts the price of which will typically be lower than the spot price at present. But then there's the question of how that price is set - is it a fixed coal price as such or is it calculated based on the price of gas, electricity or something else?

For a company that buys coal and generates electricity (or uses it in industry etc) the direct impact of a price cut is good. That gets complex in the case of electricity given the intent is to push market prices down since competitors also get cheaper fuel.

For electricity companies their electricity hedging is also highly relevant. To what extent are prices locked in and for how long? That alone gets complex - there are industrial sites where multiple companies jointly hold the supply contract. Eg there's one I'm aware of where AGL, Alinta and Origin are all suppliers to the same site. Bearing in mind AGL's selling Alinta the coal.

Then there's retailers with hedging contracts with generators and that does extend to gentailers (those who generate and retail) contracting with rivals indeed that's routine. Electricity being about the only industry where listed companies, private companies and government entities contract with each other on commercial terms meanwhile also being direct competitors.

And for another spanner in the works, transport. There are some arrangements where the higher the commodity price goes, the lower the transport price. Because from an end user perspective, the choice to burn one fuel versus another fuel depends on the delivered price on site. So in order for fuel A to remain competitive, whoever's moving it takes the hit - it's either that or the physical movement of it ceases.

Point being it's too hard to generalise. Need to analyse each company in detail. :2twocents
 
Maybe because he, like some reptiles, can't hear too well.

Bowen dismisses gas company concerns

By Andrew Brown
Updated December 11 2022 - 8:43am, first published 8:42am

Energy Minister Chris Bowen has dismissed criticism from power companies following government plans to cap the price of gas and coal.
National cabinet on Friday agreed to cap gas at $12 a gigajoule and coal at $125 a tonne for 12 months, as part of a plan to lower rising energy prices.

The government will also provide $1.5 billion for energy bill relief measures, which will be paid for by state and governments.

Federal parliament will be recalled on Thursday in order to pass the laws.
While gas companies have taken aim at the plan, Mr Bowen said retailers did not need to charge exorbitant prices.
"For anyone to argue that they need to make more than $12 a gigajoule is just ridiculous, and I don't think that argument is going to hold any water," Mr Bowen told Sky News on Sunday.

"This is Australian gas under Australian soil and Australians should pay a a fair price for that, but they shouldn't be paying a wartime price leading to very high profits for a few companies and endangering industries right around the country."
Gas retailers will also be subject to a mandatory code of conduct under the deal struck between Prime Minister Anthony Albanese and state and territory leaders.

The consumer watchdog will also be given additional powers under the changes to monitor and to enforce the code for retailers.
While the energy bill relief measures won't kick in until the second quarter of 2023, Mr Bowen said it would provide much-needed financial support for households and businesses.
He said gas companies had a social licence to ensure fair prices.

"There were businesses and industries saying to us very clearly that they would have a lot of difficulty surviving next year in the face of gas prices and electricity prices being what they were," he sad.
"That's (the job of gas companies) to defend those profits, it's not our job. Our job is to act to the national interest, our job's to defend the factories and the households around the country."

Modelling has shown the average household would be $230 better off once the gas and coal price caps come into effect, with further savings expected once the energy bill relief measures begin.
The caps will also see planned electricity price rises of 36 per cent in 2023/24 reduced to 23 per cent.
Gas was initially slated to rise 20 per cent for both this financial year and the year after, but the increases are now expected to be 18 per cent, followed by four per cent.

However, opposition energy spokesman Ted O'Brien says the plan is a disaster.

"It is a monster in the making, because not only will it fail in the short term, but it is going to have a disastrous effect on the industry over the longer term because it kills supply," he told Sky News on Sunday.
"Everybody is saying more supply is the answer here but one thing that government will not address is the need for more supply. They reject energy experts, independent agencies and the opposition."

While the opposition said they welcomed any energy bill relief for households and businesses, Mr O'Brien said more detail was needed on how the measures would deliver lower prices.
"They've had six months to come together with a package and all we see today is a cobbling together of manic thought bubbles presented as one comprehensive package," he said.
"The Australian people know we'll be here again next year, with higher prices and probably a higher risk of blackouts."
Australian Associated Press
 
IMO the process will end up costing the taxpayers heaps IMO, it will be shown to save the taxpayer, $200 odd bucks, but the GOV will end up having to spend heaps more taxpayer $ to save it. At the end of the day, the tax payer pays it.

Why not just remove GST from electricity bills for residential customers on welfare for this period, that would save 10% instantly and that is also 10% on the service charge as well as the electricity charge? Easy to do, just tell the billing company to adjust the bill, done.
It was done by the last Govt when they halved fuel excise. ?

Time will tell, but it sounds a bit like smoke and mirrors to me, from the article that I posted the other day, apparently there are only two power stations paying more than the proposed cap, for the coal anyway.?

Sounds a bit like Luigi the magician (Paul Hogan) and using Maria to distract the audience when he stuffed up a magic trick.
I guess Albo is Hoge's and Bowen is Maria, he always seems to get these $hit gigs, he was silly Billy's fall guy last outing, now the poor bloke looks like he has popped his head up again. :eek:

Can you imagine it, day after the election, arm around Chris's shoulder, "Chris you know we have this really strong commitment, purpose, I mean let's be honest VISION" and we need one of our best men to be able to achieve it, do you know anyone?:rolleyes:
 
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The inherent problem with energy, especially electricity, and why it's so often in the news comes down to it cutting across so many different areas, often in conflict with each other.

The technical aspects are absolutely rigid and non-negotiable. A 1% frequency deviation is serious enough to warrant an internal investigation. Beyond 5% and the likely outcome is outright system collapse. The technical aspects of it all are unforgiving and not-negotiable even slightly - this is "hard" physics here.

The economic aspects affect essentially the whole of society given that practically all economic activity has energy inputs.

Energy resources are strategic in nature. They literally start wars either as the subject of conflict, the means of funding it or a means of attacking the enemy.

Energy lies at the heart of many environmental issues. Smog, dams on wild rivers, uranium mining, nuclear waste, acid rain, climate change, ash dams and so on. The history of mainstream environmentalism is to very considerable extent a history of conflict with the energy industry.

Now throw in domestic politics with the voters demanding that all of the above be individually prioritised plus the political parties putting their own ideology over the top.

End result is an unresolvable mess since quite simply the various objectives conflict. It's possible to get a few aligned but extremely difficult to get the lot and that means someone's always screaming. :2twocents
 
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Yes, except it will be the UN / WEF - they will level us with Zimbabwe first.
Labor's "green" policies will speed up the process too.
that is still Communism/Socialism( and feudalism )
the very small elite have everything , the rest share the pain and suffering

and Zimbabwe might look like paradise if their plan is complete ( you can still rise to the top level in Zimbabwe , we are more likely to get a nasty cross between 'royal families ' and nepotism )

remember the ALP already have a history of throwing rank and file unionists under the bus ( numerous times ) that is why they need 'dirt files ' to keep the mid/high level compliant

maybe it will be easier planned than accomplished

and don't think the Liberals are the savior , they lost their spine decades ago too go back and read carefully Power Without Glory a ( fictional ?? ) history of Australian politics ,
 
@Smurf1976 not many easy answers, the walls are closing in, coal isn't viable, gas is only worth exporting, the unwanted child is the Australian electricity consumers.

Add to that, the renewables want a rate of return on their investment and we need twice as much installed as is base load requirement, so that the storage can be charged, when the renewables aren't working, who pays for that?

The walls are closing in.

Meanwhile who lends the money to the coal miners, to remove the overburden and expose more seams? So then there is no coal to supply the power stations anyway.

But it's worse than that, as you know, the coal generators have to put units on and off twice a day, which takes time and costs money which they can't recover in the short time they are actually online for, just so the renewables get first dibs.

Oh what a mess and to add to the confusion, we now legislate a reduction, thereby giving the coal generators every excuse to close down, someone needs to charge up the magic wand IMO. ?
I have noticed a christmas tree of pole top isolators going in near our place, when I look at the configuration, it appears they want to be able to separate the CBD from suburbia.
Time will tell.:xyxthumbs
 
IMO the process will end up costing the taxpayers heaps IMO, it will be shown to save the taxpayer, $200 odd bucks, but the GOV will end up having to spend heaps more taxpayer $ to save it. At the end of the day, the tax payer pays it.

Why not just remove GST from electricity bills for residential customers on welfare for this period, that would save 10% instantly and that is also 10% on the service charge as well as the electricity charge? Easy to do, just tell the billing company to adjust the bill, done.
It was done by the last Govt when they halved fuel excise. ?

Time will tell, but it sounds a bit like smoke and mirrors to me, from the article that I posted the other day, apparently there are only two power stations paying more than the proposed cap, for the coal anyway.?

Sounds a bit like Luigi the magician (Paul Hogan) and using Maria to distract the audience when he stuffed up a magic trick.
I guess Albo is Hoge's and Bowen is Maria, he always seems to get these $hit gigs, he was silly Billy's fall guy last outing, now the poor bloke looks like he has popped his head up again. :eek:

Can you imagine it, day after the election, arm around Chris's shoulder, "Chris you know we have this really strong commitment, purpose, I mean let's be honest VISION" and we need one of our best men to be able to achieve it, do you know anyone?:rolleyes:
the game is to make you believe the government is NEEDED and YOUR support ( instead of the reverse )

smoke and mirrors and greater dependence on the 'government '
 
the game is to make you believe the government is NEEDED and YOUR support ( instead of the reverse )

smoke and mirrors and greater dependence on the 'government '
Just in case you haven't noticed, that is already the case.
Haven't you noticed, responsibility for decision making has been removed from the individual, to anyone remotely involved who can be blamed for the poor decision.
 
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There is a rental and housing crisis apparently, so why not a rental cap? or house price cap? cos that would be stupid and politically sensitive.
 
Just in case you haven't noticed, that is already the case.
Haven't you noticed, responsibility for decision making has been removed from the individual, to anyone remotely involved who can be blamed for the poor decision.
worked that out in the '70s but back then it was all 'conspiracy nut stuff ' , you know secret clubs and 'old boy networks '
 
There is a rental and housing crisis apparently, so why not a rental cap? or house price cap? cos that would be stupid and politically sensitive.
too many ALP politicians ( and minions ) own rental properties ( they would NEVER limit their own income ) and that is only what is in the pecuniary interest register , goodness knows what is 'off-the-books'

but don't fret is isn't just the ALP
 
ever notice how they push 'green energy ' but don't inspire you to go off-grid ( and not need their 'smart meters )
Because going off grid in most situations is economically worse, for all involved.

Even if you can produce enough electricity for your own needs and have batteries to store it, you need to over size you system so that you can survive the cold and cloudy days, but then on the sunny days you aren’t connected to the grid, so have no way of selling the excess power your oversized system generates.

Being connected to the grid allows you to sell your excess once your batteries are full, and allows you to import during the low production times, so you don’t need a huge over sized system.
 
Turning down the politics as far as possible but not to zero and looking at the investment aspects, there are some broader themes here.

1. We are in an inflationary environment. Such circumstances do tend to result in things like price controls, strikes and so on. Happened in the 1970's and there's plenty of examples globally.

2. Price controls usually end up with physical shortages. It does some combination of lowering production and raising consumption. Also tends to prompt de-prioritisation of the activity, industrial action and so on.

3. Big business is as prone to ideology as is politics. Don't for a moment think they won't shoot themselves and shareholders in the foot, indeed it was doing that 30 years ago which helped create the present mess.

And then it goes back to the start, point one. We are in an inflationary environment. Once one side sees fit to raise prices, pretty soon the other side does it too.

Now none of this is new, it's been going on a very long time and plenty's been said about what was coming going back many years on this forum and elsewhere. No surprises here, it's just the expected outcome. Keep whacking your hand with a hammer and it gets sore yes.

As for politics, well Labor versus Liberal is a bit like Channel 7 versus Channel 9 or it's like Airbus versus Boeing. Same thing, just a different name. Note the date of this:

 
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