Coal company says changes to royalties will not make power cheaper

One of the Gunnedah basin’s leading mining companies says government intervention and coal price caps have failed in their intended outcomes of reducing power prices in Australia.

The assessment comes as the NSW government prepares for formal consultations with the coal industry to “navigate a future” beyond the state’s temporary coal cap, which is set to expire on July 1 next year.

Emergency directions introduced in December 2022 capped the price of coal sold to domestic power stations at $125 a tonne for 18 months.

It was implemented following Russia’s invasion of Ukraine when the price of coal surged beyond $500 a tonne. In the lead up to the 2023-24 state budget, the government is writing to relevant parties inviting feedback on the future of the cap.

The government said it would consider all options, including modernising the coal royalty system to ensure it remains fit for purpose.

Whitehaven Coal, which operates several mines in the Gunnedah region, said it will be warning government about the risk to mining communities if the ineffective price cap is extended. The company also dismissed suggestions a tweak to the coal royalty scheme could help bring down power prices. 

“The coal reservation scheme in NSW has fallen manifestly short of its stated intent to reduce domestic power prices, which have continued to rise since the policy’s implementation,” the spokesperson said.

“Any associated increase to coal royalties won’t make electricity cheaper for Australian consumers over the longer term because it doesn’t address the underlying electricity supply shortages which have been a major contributor to elevated electricity prices. 

“The NSW government must exercise caution in ensuring any changes it considers introducing after July next year don’t threaten jobs or undermine the state’s reputation as a reliable trading partner and investment destination, in contrast to what has transpired in Queensland.” 

The government will be seeking input from 16 coal mining companies, four power station operators, two unions and our key trading partners. The government’s consultation will review the impacts of the Coal Market Price Emergency directions on the coal industry and electricity market; understand the likely impact on domestic coal and electricity prices from July 1, 2024 when the directions are due to expire; consider whether potential alternative policy options are necessary to minimise the impacts on electricity bills once the directions expire; and understand the effects of a possible new coal royalty rate system, or adjusting existing royalty rates, to respond to market conditions.

Whitehaven said it will continue to engage in “genuine” discussion about the future of the mining industry.

“Whitehaven welcomes the opportunity to participate in industry consultation – provided this is genuine – and will engage with the NSW government constructively on these important issues. An internationally competitive and prosperous mining sector has underpinned the NSW economy for decades, particularly in our regions, and should continue to do so throughout the energy transition,” the spokesperson said.

The consultation will include face-to-face meetings as well as written submissions. The information received will be used to help inform the government’s priorities in the second half of the year.

According to Whitehaven’s latest quarterly report, the company supplied 299,000 tonnes of coal to Australian power stations in April-June at an average price of $115 per tonne.   Much of the coal was sourced from its lower-grade Werris Creek mine.