Prime Minister Anthony Albanese says he understands the states' concerns that introducing a price cap on coal may hurt their royalties, but insists something must be done to lower energy prices.
The government is in the process of finalising its plan to intervene in the energy market to try and curb a looming hike in power prices.
The ABC revealed last week that as part of the intervention, the government is set to cap gas prices at around $12 a gigajoule and force companies to set aside gas for domestic use.
But it is facing resistance from states over its request to put a cap in place on coal prices, with at least two states — New South Wales and Queensland — raising the prospect the Commonwealth would have to compensate them for lost royalties if caps are put in place.
Ahead of a national cabinet meeting this Wednesday, Mr Albanese said he understands the concerns of the states but something has to give.
"Unless we act there will be a considerable increase in the cost of power for both individuals and businesses," he told 5AA radio.
"What we aren't sympathetic for, though, is the idea that we have these massive windfall gains, and somehow that is occurring at the same time as businesses and people are doing it tough.
"We'll talk through cooperatively with the state and territory governments."
Mr Albanese confirmed he had spoken to the premiers of New South Wales, Queensland and South Australia about the caps.
"I don't think that there is a premier or chief minister who will sit back and say 'yep, this is all OK' for prices to continue to rise [at] the projections which are there.
"I think you'll see some common positions come out over coming weeks because we need to act on this."
Queensland Premier Annastacia Palaszczuk said she would not agree to the caps unless Queenslanders were compensated.
"Queenslanders own our assets," she said.
"Some of those profits are going back to Queenslanders in terms of direct assistance for households to the tune last quarter of $175.
"There would have to be adequate compensation. And as I said in the parliament last week … we would have to be very very convinced that no Queenslander would be worse off."
Acting Opposition Leader Sussan Ley accused the government of failing to properly understand the ramifications price caps would have.
"You can't just, sort of, clumsily wade in and put price caps in place when you don't understand the commercial realities [like] the investment horizons of the companies that are onshore producing the gas, the international agreements they've made, and on it goes," she told Nine radio.
Yesterday, NSW Treasurer Matt Kean confirmed the federal government had asked the states to impose their own caps, but he believes the Commonwealth should enforce national rules.
The October budget forecast power prices would rise by 56 per cent over the next two years, and gas prices by 44 per cent, largely because of Russia's invasion of Ukraine.
Since then, the Commonwealth has been consulting on a market intervention to curb those price rises, promising to outline the details by Christmas.
