Prime Minister Anthony Albanese will seek to use today's national cabinet meeting to strike a deal with the states and territories to curb skyrocketing energy prices, as pressure mounts on the federal government to urgently intervene in the market.
The nation's leaders will meet virtually on Friday afternoon, with time running out for the federal government to unveil the details of its proposed market intervention before its Christmas deadline.
The government is expected to temporarily cap gas prices at $12 a gigajoule and is putting pressure on the states to put a cap on coal of between $125 and $160 a tonne.
Coal-rich states Queensland and New South Wales have been reluctant to endorse a price cap. However, on Thursday, New South Wales Energy Minister Matt Kean said the parties were "close to landing a deal".
"New South Wales is prepared to take a hit because we want to protect consumers and businesses," Mr Kean said.
"I made it very clear to [federal Energy Minister Chris Bowen] that New South Wales did not need compensation for lost coal royalties as a result of the coal cap. However, we did ask for financial assistance to support families and businesses as a result of us doing what we need to do to support our country in lowering energy bills."
Federal Treasurer Jim Chalmers has indicated the government is open to what he described as a "responsible contribution", but he warned the budget was not a "bottomless pit".
Energy prices have risen sharply off the back of Russia's invasion of Ukraine, with the October budget forecasting a 56 per cent increase in power prices over the next two years.
On Thursday, Mr Bowen met his state and territory counterparts, with the ministers agreeing to develop an energy "capacity mechanism", to shore-up the reliability of the east coast energy market.
The ministers have met several times in the past six months, to try to manage the once-in-a-century transition away from fossil fuels to renewable energy.
They agreed on the design of a capacity mechanism that would allow governments to pay generators to provide electricity when renewables are not able to meet demand.
The states have been locked in a dispute about what kind of power generation would get the government cash, but it was revealed yesterday that, while federal funding would support development of batteries and pumped hydro, it would not go towards coal and gas projects.
Mr Bowen said the new mechanism would unlock $10 billion dollars of investment in clean dispatchable power to support energy reliability and security.
"This is a sensible, carefully designed mechanism," he said.
"Firming up our grids, providing extra capacity as more and more old power stations leave grids, as more and more coal-fired power stations inevitably close."
However, Shadow Energy Minister Ted O'Brien criticised the outcome of the meeting.
"Throwing an extra $10 billion at building out renewables without any detail behind the whopping commitment, is evidence that the government's plan isn't working, and the market isn't backing it," Mr O'Brien said.
"After months of inaction on addressing skyrocketing prices, the government has decided its best course of action is to throw money at a problem and hope it goes away."
National cabinet was originally meant to meet in person on Wednesday, however that was postponed after Mr Albanese tested positive for COVID-19.
The nation's leaders will on Friday also receive a COVID-19 update, and discuss disaster planning and recovery.
