Queensland and the federal government will split compensation costs for the Gladstone plant, under the agreement struck at national cabinet

A high voltage electricity transmission tower is seen in the foreground of the Brisbane CBD skyline
Queensland’s Gladstone power plant has been has been selling power to the domestic grid since an explosion at the state-owned Callide power plant in May 2021

Compensation payments for the Gladstone power plant remain the sticking point in the federal government’s coal price cap compensation negotiations with Queensland.

The Australian newspaper reported the owners of the central Queensland power plant, Rio Tinto and its partners, are set to receive up to $450m in compensation for the temporary price cap of $125 a tonne that was put in place to drive down power price increases.

Queensland and the federal government will split the compensation costs under the agreement, which was struck at national cabinet earlier this month.

Negotiations are ongoing, but a Queensland government source said $450m would be “in the ballpark”.

The Gladstone plant is one of just two generators owned by the private market and its main purpose was generating power for Rio’s aluminium smelter, also located in Gladstone.

An explosion at the state-owned Callide power plant in May 2021 destroyed one of its generators and damaged another, leaving a shortfall in the generation market that the Gladstone plant stepped in to help fill. It has been selling power to the domestic grid since.

Rio Tinto, the major partner in the plant, is also the generator’s major customer.

“That makes for some funny incentives when it comes to Gladstone,” the Queensland source said.

The Greens supported the federal government’s energy bill earlier this month, but had drawn a hard line at fossil fuel companies receiving compensation. Adam Bandt said his party would oppose any future legislation which would allow that element.

“In a cost of living crisis, Labor should be helping people, not big corporations,” Bandt said.

“This money could be used to stop people’s power bills rising at all, and then recouped by a windfall tax on coal and gas corporations.

“Not a single dollar of public money should go to [them].

“Labor must come clean about how much public money they are giving to coal and gas corporations.”

The Coalition opposed the energy bill. On Wednesday, Peter Dutton made his views known on social media.

“Seriously $450m of borrowed money given to a profitable mining company. Just the latest instalment in economic idiocy from the Albanese Government,” he said.

The compensation payments for Rio Tinto and its partners for the Gladstone generation are not expected to continue for the year the price cap is in place, with the damaged Callide generators forecast to return online in May 2023.

The mining lobby has reacted furiously to Queensland increasing its coal royalty payments at the same time as supporting the coal price cap, with the minerals lobby threatening to run a campaign against the government’s royalty changes in the lead up to the 2024 election.

The federal government is also facing industry backlash against the temporary price caps, particularly from the gas industry, which will be limited to $12 a gigajoule when selling to the domestic market.

The price cap came into effect earlier this month. Consultation for a mandatory code of conduct for the gas industry has also begun, with intent to have it in place by early next year.

Source – https://www.theguardian.com/australia-news/2022/dec/28/gladstone-power-plant-compensation-a-flashpoint-in-federal-governments-coal-price-cap-negotiations