Prime Minister Anthony Albanese will meet virtually with premiers and chief ministers for national cabinet on Friday to discuss how to ease pressures on households struggling with soaring energy costs.
Energy Minister Chris Bowen is confident a deal will be reached, but wouldn't confirm whether rebates for households and businesses were on the table.
A report by The Australian said rebates would be funded by the federal government and would be issued via the state governments in exchange for NSW and Queensland capping coal prices.
Mr Bowen said he tended to ignore speculation in the papers.
"We've been looking at our respective powers and those of states - particularly those states with black coal production which is New South Wales and Queensland - and talking to them about the most effective response," he told ABC Radio on Friday.
"We won't do anything to fuel inflation ... so anything we do will be seeking to reduce the bills before they arrive at the letterbox of the consumers."
The minister, along with his state and territory counterparts on Thursday agreed to a capacity mechanism that would rely on renewable energy.
He said it was the biggest step forward towards Australia's transition to renewables.
"Let's just be very blunt and frank: coal fire power stations are going to close," Mr Bowen said.
"The task here is to ensure that new energy comes on not after coal fired power leaves, because that's too late, but before."
He said the agreement would encourage investment and create jobs in the renewables sector.
NSW Energy Minister Matt Kean said his state does not need compensation for lost coal royalties due to the coal cap but called for financial assistance to support families and businesses.
Queensland Energy Minister Mick de Brenni - whose state has been calling for compensation - said he would brief Premier Annastacia Palaszczuk before the meeting.
The October budget forecast a 56 per cent increase in electricity prices and 44 per cent rise in gas prices for households in the next two years.
National cabinet was delayed for two days and will be held virtually after Mr Albanese tested positive for COVID-19 on Monday.
The leaders will discuss COVID funding arrangements for hospitals as the nation braces for another wave.
Disaster management planning is also on the agenda as the country enters a high-risk summer.
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