Cap Comes at a Cost
Pressure is increasing on the governments over the proposed coal price cap being imposed to contain electricity price rises.
Although originally meant to only apply to the producers of thermal coal who have supplied that coal domestically to NSW power generators during the past three years, it has now been extended to coal producers not currently involved in domestic coal supply.
NSW Minerals Council CEO Stephen Galilee said the policy would have no meaningful impact on electricity prices but will come at a significant economic cost.
“Extending the policy is a radical change of approach that highlights how extremely rushed this policy process has been,” he said.
“Forcing mines designed and approved for export to supply the domestic market will have significant impacts on existing supply chains and the transport system, pushing up costs and risks.”
Significant compensation will also have to be handed to coal-based power producers who have contracts above the government-imposed temporary price cap of $125 a tonne.
Up to $500m in taxpayer dollars may have to be handed out to the operators of Eraring power station, along with Bayswater, Liddell, Mount Piper and Vales Point B.
Mr Galilee said the price cap policy undermined the reputation of NSW as an investment destination, and as 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.
“NSW coal producers will continue to engage with NSW Government officials in the weeks ahead in an attempt to minimise the economic damage of this flawed policy.”
Meanwhile, the Financial Review reports that Australia’s biggest coal miner Glencore has challenged the NSW government to explain how a cap on coal prices will flow through to household power bills while BHP says the cost of producing coal in NSW may soon exceed the government’s $125 cap on prices.
It also reported that the expansion of the coal price cap will likely cause headaches for Whitehaven who have sold virtually all their coal to foreign buyers in recent years and BHP, who dismantled the 10-kilometre-long conveyor that carried coal from its Mt Arthur mine to AGL Energy’s nearby Bayswater and Liddell power stations around three years ago and have exported all of Mt Arthur’s product since then.