The federal government could underwrite billions of dollars in investment in new coal- and gas-powered plants as it looks to shore up support for its National Energy Guarantee.
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Prime Minister Malcolm Turnbull will announce his support for the Australian Competition and Consumer Commission proposal at the coalition party room meeting on Tuesday.
Under the ACCC plan, the government would underwrite new power generation whether that be from coal, gas or renewables.
The move is likely to calm the waters within a divided coalition party room, with the new assets to supply power to large energy users. This would have the effect of lowering power prices in general.
"The focus is on getting cheap power into the system. It decreases prices for everyone," a source told The Daily Telegraph. It would also curtail the control major energy providers have on the market.
ACCC chairman Rod Sims will brief Nationals MPs on the idea at a separate meeting on Monday, The Australian Financial Review reported.
Energy Minister Josh Frydenberg is confident his coalition colleagues will back the NEG after the plan won in-principle support from the states and territories.
Several high-profile government backbenchers, including Liberal Tony Abbott and Nationals MP Barnaby Joyce, have threatened to cross the floor on the policy.
Senior government minister Alan Tudge hopes it doesn't come to that.
"Obviously it's not a good look and so I hope Tony Abbott will be able to sit down with Josh Frydenberg, discuss his concerns, and that we can actually have a united position," he told the ABC on Sunday night.
Nationals deputy Bridget McKenzie played down the number of malcontents in coalition ranks.
"I wouldn't say there's lots of people in the coalition agitating. I think the coalition is united behind reliable and affordable power," she told reporters at Canberra airport.
Mr Frydenberg has flatly rejected a "crass, calculating" demand from Victoria for a proposed 26 per cent greenhouse gas emissions reduction target to be set by regulation, rather than legislation.
The federal opposition wants a 45 per cent emissions reduction target and is calling for the setting to be reviewed sooner than 2024.
Labor senator Kristina Keneally said the opposition was willing to work with the government, but would not be handing it a blank cheque.
The Minerals Council of Australia, whose members use 11.5 per cent of the country's electricity, is urging federal coalition MPs and state governments to back the policy.
"If this policy is blocked by those who put politics ahead of the national interest, then Australia will continue to have a dysfunctional energy system," chief executive Tania Constable said on Monday.
Australian Associated Press
