Households are set to save at least $230 on average on their power bills after national cabinet agreed to energy price relief measures.

After a virtual national cabinet meeting on Friday, Prime Minister Anthony Albanese and state and territory leaders signed off on plans to cap the price of coal and gas, as well as financial support for power bills.

The federal government will provide $1.5 billion in energy bill relief to eligible households and small businesses, which will be paid through state or territory governments.

The temporary support is expected to come through in the second quarter of 2023, following a national cabinet meeting in March.

Gas prices will be capped for one year at $12 a gigajoule, with gas retailers subject to a mandatory code of conduct.

The consumer watchdog will also be given new powers to enforce and monitor the new code.

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Federal parliament will be recalled next week in order to pass the changes.

Coal prices will also be capped a $125 a tonne.

Modelling has shown the average family would be $230 worse off if the coal and gas prices weren’t capped.

Further savings are expected to be made for households once the $1.5 billion financial package comes into effect next year, but further details will need to be worked out by state and territory treasurers on how jurisdictions pass on the savings.

Mr Albanese said the bill relief would not be direct cash handouts, to protect inflation levels.

“It will not be the same plan in each state and territory, given each of them have different systems,” he said.

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“That is part of the complexity of what we have been dealing with is the fact that we have eight different systems around the country.”

Gas prices were expected to rise by 20 per cent in both this financial year and the next.

However, modelling has shown the intervention will limit the rise to 18 per cent this financial year and four per cent the year after.

The modelling has also shown expected electricity price rises of 36 per cent during 2023/24 will instead be 23 per cent during that time.

Mr Albanese said extraordinary measures would be taken to lower the cost of energy.

“We’re taking urgent action to shield Australian families from the worst impacts of these price hikes,” he said.

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Opposition Leader Peter Dutton said the agreement reached at national cabinet was a sign the government had broken promises on energy bill relief.

He said there had been no experience globally of success in capping energy prices.

“This is a very difficult situation for families and for small businesses to see a government that has no idea as to what they’re doing,” he said.

“The prime minister … could not answer the most basic details, it’s obvious that there is fracturing between the states and territories.”

Business Council of Australia chief executive Jennifer Westacott welcomed the relief measures but said long-term plans needed to be managed.

“This is a hugely complex system and there are no easy answers,” she said.

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“Without careful management price caps will have long-term consequences that drive up and sustain higher prices for consumers.”

Minerals Council of Australia chief executive Tania Constable said the deal only created further uncertainty for the sector.

“You don’t fix the system by making it more complex. The solution is more supply, not more regulation,” she said.

“To truly address the high cost of electricity that is hurting households, business and the mining sector, governments must act quickly to increase the supply of gas into the market.”

© AAP 2022

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