‘A national interest to account for’: Chris Bowen insists energy price caps prioritise cost-of-living relief not companies’ profits

Climate Change and Energy Minister Chris Bowen has dismissed claims of the federal government having prioritised profit maximisation for energy companies instead of providing relief for households through a period of crippling electricity prices.

Discussing findings of the 2023-24 GenCost report’s consultation draft – released collaboratively by the CSIRO and Australian Energy Market Operator (AEMO) on Thursday – Mr Bowen addressed complaints from energy providers about their interests being compromised while setting industry price caps for consumers annually.

The price cap, known as the Default Market Offer (DMO), is determined by the AEMO each year, through which retailers cannot charge small businesses and residential electricity customers above a set maximum on default plans, known as standing offer contracts.

It applies to regions where no other retail price regulation applies – South Australia, New South Wales, and south-east Queensland.

“I think the Australian Energy Regulator does an excellent job. They weigh up a whole range of factors,” Mr Bowen told ABC AM, in response to companies’ complaints about profits being too slim.

“Energy company profits have been healthy, and I think in this spirit, in this environment of cost of living pressure, it’s quite right that the Australian Energy Regulator would prioritise cost of living, and I know my state and territory ministers agree with me about that.

“Of course we want profitable energy companies, but we want families receiving cost-of-living relief as well… I don’t agree with any argument to say energy company profits should be prioritised.”

Mr Bowen added that while it was standard for energy companies to try and seek higher gains, the government and AEMO would always give precedence to the consumer given “we have a national interest to account for, and we’ll continue to account for it”.

“They are entitled to try and maximise their profits… What I do is get on with the job, but I also call it as I see it, and in my view energy companies are entitled to a profit, but consumers are entitled to be prioritised in the Australian Energy Regulator’s determinations,” he said.

The wholesale cost of electricity is the largest component of retail prices and made up between 30 and 40 per cent of the last DMO which came into effect on July 1.

Since 2022, energy costs have remained significantly higher as a result of challenges with fossil fuel availability, inflated coal and gas costs amid global supply and production shortages, reliability issues with aging coal-fired power plants, and the “increasingly peaky shape of customer demand”.

However, coal and gas price caps instated by the Albanese government under its Energy Price Relief Plan, with a cap of $125 a tonne of coal used for electricity generation and an emergency 12-month cap on gas prices at $12 per gigajoule, have helped combat soaring power costs and driven down the DMO.

Mr Bowen said the 2024-25 offer, which will be drafted by February, “will be very different” to this year’s as “we’re already seeing wholesale prices way down on last year”.

The Energy Minister also doubled down on the key finding of the GenCost draft report, which established that renewable energy remained the cheapest form of power in Australia, even after the significant expenses around wind and solar storage, transmission, and new-build technology are factored in.

Nuclear small modular reactors (SMRs) emerged as the highest-cost technology explored in the report.