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Malcolm Turnbull fights for his political life, Phillip Coorey

Malcolm Turnbull fights for his political life, Phillip Coorey

Malcolm Turnbull's capitulation on energy has failed to ease pressure on his leadership and close supporters of Peter Dutton claimed momentum was growing for a spill as early as this week.

Late on Monday, the Prime Minister and senior ministers were ringing MPs urging unity ahead of what could be a critical party room meeting on Tuesday.

To try to head off a challenge by the Home Affairs Minister Mr Dutton, the government effectively killed the National Energy Guarantee on Monday by postponing indefinitely the legislation to implement the policy.

It also outlined a raft of interventionist powers designed to bring down power prices, including a last resort option of forced divestment for companies such as AGL Energy.

Mr Turnbull accepted that without Labor, he did not have the support within his own party to secure the passage of the bill through the lower house, effectively a concession he could not command control.

Flashpoint looms

The revamped policy will be put to a party room meeting of Coalition MPs on Tuesday morning for approval.

While some rebels such as Craig Kelly were appeased by the backdown and praised Mr Turnbull, others were still gunning for the leadership, meaning Tuesday's meeting looms as a flashpoint for the Prime Minister.

The company tax cuts were also headed for the gallows in the Senate on Monday night, despite an offer by the government to exclude the big four banks by exempting companies with $500 billion in held assets. One Nation refused to do a deal.

There are few divisions in government over company tax but energy was the catalyst for broader discontent. Despite the capitulation, supporters of Mr Dutton claimed it was only a matter of time before there was a move.

"It's a watching brief, there's momentum our way," said one MP.

Asked if it could be this week, he said "I wouldn't rule it out".

MPs who were standing by Mr Turnbull last week told The Australian Financial Review they had shifted but, as of Monday, the numbers were not there for a spill.

"It's hard to see a pathway forward with Turnbull," said one MP who, until the weekend, was backing the Prime Minister.

Said another: "The knot is tied."

If Mr Turnbull were deposed, it would make John Howard, between 2004 and 2007, the last prime minister to serve a full term.

Pre-emptive strikes

Moderates who face a purge should there be a change launched pre-emptive strikes against Mr Dutton.

They say he is being used by a Trojan Horse by Tony Abbott who expects Mr Dutton to lose the election, paving the way for Mr Abbott to come back as leader.

One senior Liberal noted Mr Dutton, as health minister under Mr Abbott, tried to impose a $7 Medicare co-payment and cut $57 billion from public hospitals. This controversy set the Coalition back for years and cost it the last election.

"And he didn't stop the boats," said another.

"[Former immigration minister] Scott Morrison did all the heavy lifting on that."

Last night Channel 10 reported Mr Dutton may be ineligible as an MP under section 44(v) of the Constitution because he is the beneficiary of a family trust which receives a subsidy from the Commonwealth.

Energy shambles

Following a tense weekend of phone calls and loose number crunching, Mr Turnbull announced on Monday morning the NEG was being shelved indefinitely.

It was the second backdown in as many days. To try to placate the rebels who opposed legislating the NEG's aim to reduce power sector emissions by 26 per cent on 2005 levels by 2030, Mr Turnbull announced on Sunday the government would instead regulate it. A regulation is done by a ministerial stroke of the pen whereas legislation must pass both houses.

The rebels opposed legislating the target because they claimed Australia was surrendering its sovereignty to the Paris climate targets.

But they then opposed regulation because a Labor government could easily ramp up the target to 45 per cent.

With a one-seat majority and with several MPs threatening to cross the floor, Mr Turnbull and his leadership group raised the white flag on Monday morning.

They reverted to legislating the target but said the legislation would not be introduced until it had a chance of passing the lower house. That would be after the next election, if at all.

"In politics you have to focus on what you can deliver and that's what we've done and we'll continue to do," Mr Turnbull said.

The market intervention, as flagged last week, stems from last month's Australian Competition and Consumer Commission Retail Electricity Pricing Inquiry, although it advised against divestment.

As first revealed by The Australian Financial Review in May, this includes the power to force companies such as AGL to divest assets.

Other price measures include a "safety net" in which retailers would have to offer customers the option of low-cost, default price contracts.

'Well done to the PM'

And the government has agreed to effectively underwrite the construction of a new generator of "firm" electricity by agreeing to be a buyer of last resort of its power.

Mr Kelly, the most outspoken backbencher on energy, praised Mr Turnbull for his "courage" and said his leadership should be safe.

"Well done to the PM, you've listened to your team, you're a strong leader," Mr Kelly said.

Barnaby Joyce was also happy, as were other renegade Nationals Andrew Gee and George Christensen.

But angry Liberals said the capitulation, though demanded, was a sign of weakness. One MP likened it to Kevin Rudd's fatal act of abandoning a carbon price in 2010.

"He spent months advocating for the NEG," he said.

"There's no political judgment.

""Our people on this issue won't sit with Labor. That should have been the judgment in the first place."

Australian Financial Review

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