The Prime Minister Anthony Albanese has accused gas generators of "gaming" the system, taking advantage of the energy crisis and forcing an unprecedented intervention by the market operator.
Some generators withdrew from the market this week, after soaring power prices were capped, and were then compensated by the market operator when directed to pump power into the network.
The Australian Energy Market Operator announced it was taking over the energy market on Wednesday, after it said the market was failing to operate.
Mr Albanese said there's a disincentive built into the power market for generators to operate properly.
"There was a bit of gaming going on of the system, which is why AEMO used its tools at its disposal to intervene, so we do have these short-term issues," he said.
The new Prime Minister has already flagged he will seek to rewrite the rules on how the energy market operates to prevent a situation in the future where gas generators would hold back on supply as they wait for the compensation trigger.
For now, he supported a continued intervention by AEMO, and said the energy situation would remain difficult.
"It is just dishonest if I stood here and said that I could create a new power grid in a day. You simply can't do that," he said.
"What we needed to do was to have a short-term measure in place, but also to make sure that we get that [renewables] investment, so that in the future we don't have these problems."
The peak body representing energy generators, the Australian Energy Council, said Mr Albanese's claim was wrong.
Its chief executive Sarah McNamara said the difficulties had emerged from the cap imposed on prices.
"When the cap was applied generators and large-scale batteries were faced with difficult decisions on how to operate," she said.
"Some withdrew their capacity from the normal dispatch process but remained available to be directed back into the market by AEMO."
She said while the cap was in place, limited stocks were being dispatched in such a way that they would have quickly exhausted if generators and batteries had not been removed from normal dispatching.
WA Premier says answer lies in gas reservation laws
West Australian Premier Mark McGowan said the east coast should follow his state's lead to introduce laws that would force companies to keep some of their supply onshore for domestic use.
WA introduced a mechanism in 2006 that required future gas projects to keep at least 15 per cent of what they produced for local use.
He said if similar laws were in place on the east coast, it could have averted the crisis.
"The gas is actually the property of the people of the state, whichever state that is, and there should always be enough for the state and the country," Mr McGowan said.
He urged the Prime Minister to use the crisis to introduce an east coast mechanism, and to make it apply retrospectively.
"There's never a good time, but in light of what's going on in the eastern states, certainly I would have thought the best time to put something in place is now, when there is a crisis as we speak," he said.
"Obviously putting it in place retrospectively is difficult, but when you have got a crisis … that's what I encourage federal government to do."
Industry Minister Ed Husic warned gas producers that all options were on the table, including a national gas reservation policy.
"I am absolutely agitated," he said.
"I've got a great deal of sympathy with the view in the broader public that these are Australian resources that should be available for use by Australian households.
If we are shipping out of some of our ports seven times the level of supply that is used by Australia in one year, this is not an issue that we don't have the gas."
