Debate over energy price cap heats up

Queensland and NSW state premiers have laid out their demands as the federal government scrambles to reach national consensus on a plan to cut household and business energy prices.

The federal government has been talking about stronger energy market regulations since the October budget showed electricity prices likely increasing by 56 per cent over two years and gas prices by 20 per cent annually in the same period.

While the federal government remains tight-lipped about how exactly it will rein in energy prices, speculation of a multi-pronged approach surfaced this week, with price caps likely on the agenda.

Queensland Premier Annastacia Palaszczuk is strongly opposed to fossil fuel price caps, particularly on coal, calling for compensation if they're implemented.

Her government believes a cap would eat into budget revenue from public coal-fired electricity generators and mines, which are used to pay household power bill rebates.

NSW Premier Dominic Perrottet also wants to be compensated if his state is left to foot the bill for a coal price cap, although the state government supports price caps as a measure to bring prices down.

Despite the posturing ahead of next Wednesday's national cabinet meeting, which will see the prime minister and his state and territory counterparts discuss plans to lower energy costs, the government is positive it can land a solution that will suit everyone.

Industry Minister Ed Husic said all government leaders were united behind the common purpose of bringing energy prices down despite this week's rhetoric.

"States are paying a lot of money at the moment because of what they're seeing with energy prices," he told ABC News on Thursday.

"They shouldn't be forced to do this because of the behaviour, in particular, of some gas companies, that are just wanting to be able to make profit no matter what."

But Liberal senator Simon Birmingham said it was understandable states and territories were concerned about the government's plans, arguing that such interventions would disincentivise investment in new energy supply.

"They've got to make sure that it is a policy that will deliver for consumers in the short term and the long run that won't drive investment out of Australia and that actually doesn't benefit one state over another," he said.

A report commissioned by a group representing oil and gas exploration companies also found price caps decreased the incentive for exploration and risked long-term supply.

"We need to look at the entire energy supply chain for solutions, not isolate only one part of it," Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch said when commenting on the report.

But for consumers, power price increases are taking a toll, with confidence in the energy market sinking to the lowest point since 2019.

Energy Consumers Australia chief executive Lynne Gallagher said poorer Australians were suffering, and called for intervention in the energy market so that consumers weren't bearing the brunt of the energy crisis.