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Gas price caps might bring a "chilling" impact to ongoing investment but the federal government insists its power bill savings plan is the right solution for industry and households.
The government will cap gas prices at $12 a gigajoule for the next year, something Australian Petroleum Production and Exploration Association CEO Samantha McCulloch said "unravelled" the country's open market economy.
She said only addressing supply issues could truly get power prices heading in the right direction.
"We're seeing this volatility in terms of the demand for gas, particularly from the power sector … what we need to do to put sustained downward pressure on prices is bring on more supply," she told ABC Radio.
"But the reforms announced on Friday will do the opposite of that - they are far-reaching and represent a dismantling of the gas market that will have a chilling effect on the investment needed to bring on that new supply."
Ms McCulloch, who said the proposed intervention wasn't temporary but rather "ongoing regulation and control" by government on the market, added the changes could bring power prices up long term.
But Treasurer Jim Chalmers didn't accept Ms McCulloch's take that investment would dry up as a result of the intervention, saying finding ways to back cleaner energy was exactly what the market wanted.
"The steps we took on Friday ... align with our objective, which is to invest in more capacity in our energy markets to deal with the near-term pressures … (and) put in place the foundations for an energy system driven increasingly by cleaner, cheaper, more reliable, more renewable energy," he told reporters.
"People understand the future of our economy will be increasingly powered by (renewables) ... and we need to make sure we have the clarity and the consistency to feed that investment in new energy capacity in our system."
He said high gas prices had the potential to "hollow out" the manufacturing sector in Australia, leading to many businesses going under.
Some manufacturers are being quoted gas prices $23 a gigjoule above that being set under the government's plan.
The government's proposal would also see coal capped at $125 a tonne.
The laws are set to go to parliament on Thursday.
