Updated October 17, 2017 15:57:44

A meeting of the Coalition party room has agreed to ditch the Clean Energy Target (CET).

MPs today signed off on a new plan that Prime Minister Malcolm Turnbull argues will make power bills cheaper and more reliable while still cutting carbon emissions.

That plan replaces the CET with a National Energy Guarantee (NEG), which requires retailers to use a percentage of electricity from so-called dispatchable sources such as coal and gas, batteries or pumped hydro.

That would ensure they meet their obligation to deliver reliable power.

The decision came after the Cabinet last night agreed to dump the CET recommended by Chief Scientist Alan Finkel.

The CET would have seen electricity companies forced to provide a set percentage of their power from low-emissions technology such as renewables and efficient gas.

The increased costs of sourcing energy from these types of providers would have been passed on to consumers.

The new scheme does not provide subsidies for renewable energy, but does include an energy intensity calculation.

This calculation would mean retailers will have to buy power that is efficient enough to ensure Australia is on track to meet its Paris target.

Compliance rules for companies that fall short of their obligations have not yet been set, but it is likely they would be able to make up a shortfall the following year.

The Government said its Energy Security Board estimated a typical household could save between $110 and $115 each year for a decade from 2020.

The head of the Energy Market Commission, John Pierce — who is a member of the Energy Security Board — said that figure was an average over the decade, leaving open the possibility it would be much lower in the early years.

Mr Pierce told Sky News that some modelling showed the saving could be as low as $25 a year in 2020.

When Mr Turnbull was asked in Question Time if the Energy Security Board had provided any lower figures, he said the only information he had was the figure quoted in the Security Board's letter to him, which shows the saving of up to $115.

Andy Vesey, chief executive of energy retailer AGL, tweeted his backing for the Government's plan and urged Labor to support it.

Unveiling the new policy, Mr Turnbull described it as a "game-changer" that would "deliver affordability, reliability and responsibility".

"[This plan means] we keep the lights on and we can afford to keep them on, and that we meet our international commitments under the Paris Agreement to cut our emissions," he said.

Energy Minister Josh Frydenberg said of the plan: "This is a credible, pro-market policy that delivers lower electricity prices. It means no subsidies, no taxes, no trading systems."

The head of the Energy Security Board, Kerry Schott, explained how the plan would help in terms of reducing emissions.

"The obligation to have a reliable power system is now intimately linked with an emissions reduction target," Dr Schott said.

"And if you don't have those two things linked together, you have a danger of an increase in intermittent renewables without having a reliable and dispatchable power to go with it."

"And it's very important that you always have dispatchable power where you have intermittent resources."

Coalition says NEG means 'heavy lifting' done by retailers

In a video shared to the Prime Minister's public Facebook page, he pitched it as a plan that would deliver "cheaper, more reliable electricity for Australian families and businesses".

Deputy Liberal leader Julie Bishop added that it would drive prices down by using market mechanisms.

But Labor's energy spokesman Mark Butler said dumping the CET was a bad idea.

"This Government appears to be hell-bent on destroying renewable energy … restricting its growth over the next few decades," he said.

And South Australian Premier Jay Weatherill denounced the plan as a "complete victory for the coal industry".

Mr Weatherill accused the Prime Minister of being unable to act in the public interest.

The Premier said it was a capitulation to former prime minister Tony Abbott, who supports a new coal-fired power station being built.

He said he expected the Federal Government would set the new mechanism at a level that would be too low to be effective and would ensure the only benefit would go to existing coal-fired power stations.

Abbott claims win after CET dumped

During this morning's party room meeting to discuss the new energy plan, 30 members of the Coalition spoke, including two who expressed opposition to the policy.

One backbencher was pleased about the CET being dropped, but still had concerns about prices. They called for the Government to build its own coal-fired power station.

The other, a Nationals MP, expressed concern about the plan maintaining the Paris emissions reduction commitments.

Coalition backbenchers including Mr Abbott and Craig Kelly had been publicly critical of the CET before this morning's meeting.

A party room source told the ABC that Mr Abbott pushed for a "political debate" after the "policy debate", but was met with silence.

The former PM took to Twitter shortly after the meeting to claim "progress" in the energy debate.

The new plan will need the support of states and territories before it could come into effect.

South Australia has already said it is seeking more details about the new proposal.

Topics: electricity-energy-and-utilities, environment, energy, alternative-energy, government-and-politics, australia

First posted October 17, 2017 11:30:46