The Turnbull government has announced a three-pronged intervention to try and lower energy prices by restricting gas exports, abolishing an appeals mechanism used to set high prices, and potentially building its own power plants.
The third measure has thrown doubt over plans for a clean energy target but the government insisted such a scheme was still under consideration.
Declaring affordable and reliable power outweighed concerns about sovereign risk or increased government intervention, Mr Turnbull confirmed he would enact Constitutional powers to force gas exporters to redirect supply to the domestic market.
He hoped this would have some short-term impact on prices which are being driven sky high by exports.
"The foreshadowing of the regulation has already resulted in wholesale (falling) prices and of course, how they translate into retail prices or prices for industrial users is another thing," he said.
Abolish appeals
Secondly, the government will legislate to abolish the limited merits review, a process used by power utilities to appeal price rulings to the Australian Competition Tribunal.
Energy Minister Josh Frydenberg said the review, available to other utility providers, had added about $6.5 billion to power bills in recent years, or about 50 per cent of household costs, due to gold plating of poles and wires.
The abolition, which will take out the next review in 2019-20, will be fought by the states which still own their power assets and Mr Frydenberg said passage of the legislation would be a test for federal Labor.
Price decisions would instead start and end with the Australian Energy Regulator.
"By abolishing the limited merits review process, we believe that that will put downward pressure on electricity prices. We tried to get COAG agreement on this. But various states have a vested interest in that they own some of the poles and wires," he said.
Reverse auction
The third prong will be to replace the continuous and dispatchable baseload capacity loss caused by the closure of coal fired power. Mr Turnbull insisted this did not mean the government was shelving plans for a longer term clean energy target.
He endorsed a proposal by the Minerals Council of Australia in which the combined 3600 megawatt generating capacity of the recently closed Hazelwood power station and the Liddell power station, due to be closed in 2022, be put out for reverse auction.
The successful bidder would be constrained by an emissions baseline of 0.75 tonnes of carbon produced per megawatt-hour of energy generated.
This would enable wind, solar, hydroelectric, gas and so-called clean coal, or high efficiency, low emissions (HELE) to compete.
Because the power would have to be able to be dispatched when needed, the renewable bidders would either have to have back-up battery storage or a co-generation agreement with a fossil-fuel power station to provide back-up when there was no wind or sun.
Technology agnostic
Mr Turnbull said the proposal would be technology agnostic and coal not necessarily favoured. He said if the Australia Energy Market Operator deemed it necessary, the government would be involved, be it through hydro, gas or HELE coal.
"Our view is that you can't just sit back, cross your fingers and hope that everything will turn out ok," he said.
"We believe that in this market, there needs to be stronger involvement from government, stronger leadership.
"We need to be absolutely certain, particularly over the next decade or so, as this transition starts to unfold, we've got to make it very certain that we've got affordability and security covered."
Mr Turnbull said the three options combined showed the government was attuned to the concerns of consumers and business about energy prices.
"We are focused on this issue rigorously in the short-term, in the near term and the medium term and the long-term," he said.
