McArdle attacks Federal Government's energy white paper

REGIONAL Queenslanders could face more price hikes on their power bills after the Federal Government recommended the state cut subsidies and price controls on electricity.

Federal Energy Minister Martin Ferguson released the government's final energy white paper on Thursday, which prompted an attack from his Queensland counterpart Mark McArdle.

Among the paper's chief recommendations were to deregulate the energy market and remove state retail price controls and subsidies.

The state government paid out $640 million to regional consumers to help cut the extra price they paid on their power bills associated with delivering power to more remote areas.

"What Labor will not say today is how the current pricing system, heavily determined by its own Australian Energy Regulator, will deliver lower network costs," Mr McArdle said.

"Network costs are partly determined based on a return on the value of assets, even in Victoria's deregulated electricity sector."

Mr McArdle said electricity networks in Queensland and New South Wales needed to cover significant distances and were vastly different to the Victorian deregulated market.

On top of the recommended cuts to price caps and subsidies, the Australian Energy Market Commission estimates the average residential price would rise by 37% between 2011-12 and 2013-14.

However, Mr Ferguson said he expected the price of electricity to fall as a result of the proposed changes.

"We've gone through a peak, we've had a peak in investment, network requirements; based on our assessment it's going to fall off in the next couple of years," he said.

Mr Ferguson said the reforms would address weaknesses in the energy market's regulatory framework, but he did not want state governments driving the changes.

He said he believed that once the reforms were completed, the private sector would come in to take over the government's role in the market.

The gas market would also be affected by the proposals, with Mr Ferguson officially ruling out any domestic reservation of LNG from export.

While this move would disappoint the manufacturing sector, gas industry lobby, the Australian Petroleum Production and Exploration Association welcomed it.

APPEA chief executive David Byers said only a market-based energy policy could enhance Australia's attractiveness to international companies looking to do business.

The proposals in the paper will go to a meeting of state and federal energy minister later this month, with Mr Ferguson hoping all parties could come to an agreement during the December round of COAG meetings.