Finance Finance News Bowen faces calls to slug gas companies with windfall profits tax
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Bowen faces calls to slug gas companies with windfall profits tax

Blackouts in NSW, Queensland amid energy crisis

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The Albanese government is facing renewed calls to introduce a windfall profits tax on the gas industry after a new report found companies exporting the commodity from Australia were 95 per cent foreign-owned.

The British government announced in May that it would use a windfall profits tax to fund payments to households to help with the rising cost of energy and other essential goods.

But Energy Minister Chris Bowen has so far ruled out introducing such a tax in Australia, and instead resorted to asking gas companies “to do the right thing by Australian domestic consumers”.

Research released by progressive think tank The Australia Institute on Monday could heap pressure on Mr Bowen to reconsider his approach.

It came hours before the Australian Energy Market Operator warned of potential blackouts in NSW and Queensland after introducing a cap on wholesale prices of $300 per megawatt hour on Sunday.

Queensland avoided blackouts on Monday night thanks to generators but the energy regulator warned residents there and in NSW that there might be more challenges on Tuesday.

Residents had been urged to turn down heaters and switch off household appliances to conserve power.

“At this stage, these efforts have provided sufficient generation to cover the lack of reserve three shortfall,” a spokesman said.

“AEMO will continue to monitor reserve conditions closely in Queensland … providing further updates should conditions change.”

‘A fair price’

The Australia Institute found that the average foreign ownership share of gas companies in Australia was 95.7 per cent, with more than seven out of 10 local gas export projects at least 90 per cent foreign-owned.

Report author David Richardson said this meant that gas companies operating in Australia were obligated to put “foreign, private interests ahead of the national interest”.

“It’s time for the government to consider a windfall profits tax, as recently enacted by the UK Government, to ensure Australians get a fair share of our natural resources and this $62.5 billion industry,” Mr Richardson said.

Grattan Institute energy program director Tony Wood backed the calls for a windfall profits tax and described it as one of only two options for the government to bring down gas prices in the short term.

The global price of gas has risen sharply as international demand recovers from the pandemic and supply is restricted by sanctions imposed in response to Russia’s invasion of Ukraine.

Mr Wood told The New Daily the situation was “creating a windfall for gas producers” and the government should either introduce an extraordinary profits tax or threaten to do so.

“They can talk to the gas producers and say: ‘We think you shouldn’t be getting this windfall, the consumers are suffering, not because of your cleverness, but because of the unusual circumstances. You should be supplying gas into the domestic market, and you should charge no more than a fair price’.

“They can decide what that price is. And then they can say: ‘If you don’t do that, we will apply a windfall profit tax above that number anyway, and take the money off you. So why don’t you come to the party and do the right thing?’”

Mr Wood said it would be in the gas producers’ interest to play ball and “not destroy the domestic market”, as they will rely on local consumers when the war in Ukraine ends and the global market returns to normal.

“So, arguably, the threat of something like a windfall profits tax, or some other form of volume or price controls from the government, would cause the producers to come to the party on providing gas at a fair price,” he said.

‘Stare them down’

Former prime minister Malcolm Turnbull also threw his weight behind volume and price controls on Monday.

He told the ABC such controls were necessary to increase supply to the local market and put downward pressure on surging prices exacerbated by high demand due to a cold winter and outages at coal-fired power stations.

In May, more than 30 per cent of Australia’s coal power capacity was offline due to a mixture of regular maintenance and unplanned outages.

“The minute [the government says] they’re going to do it, the gas companies will find the gas and agree to offer it at lower prices,” Mr Turnbull said.

“Unless you’re prepared to stare them down … we’ll have wholesale prices at $400 a megawatt and higher.”

The renewed calls for a windfall profits tax come after Mr Bowen met state and territory energy ministers last week to discuss ways to tackle the current energy crisis.

Among other things, ministers agreed to give the Australian Energy Market Operator more powers to buy and store gas to be released in times of shortage.

Mr Wood said it was unclear how such a measure would work in practice and the policy would have no effect on prices in the short term.