Tensions between the federal government and AGL Energy are at boiling point after senior ministers accused the generator of misusing its market power by refusing to entertain an offer from Alinta Energy to buy its ageing Liddell power station and prolong its life.
But as Energy Minister Josh Frydenberg flagged calling in the Australian Competition and Consumer Commission should AGL refuse to sell, the consumer watchdog confirmed that such a refusal would not constitute anti-competitive behaviour.
ACCC chairman Rod Sims said even though AGL would benefit from higher prices caused by the closure of Liddell and therefore had an incentive to close it, "it's a bit difficult to construct a misuse of market power out of somebody not wanting to sell an asset to a competitor".
"We're not looking at this as a breach the misuse of market power provisions," he said, adding the issue was policy dispute between the government and AGL.
The government has dramatically escalated pressure on the AGL board to scrap plans to decommission the old NSW power station in 2022 after Chinese-owned generator Alinta expressed an interest in buying it for around $1 billion and keeping it operating for another five to seven years.
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Despite Prime Minister Malcolm Turnbull ringing AGL Chairman Graeme Hunt on Tuesday night to urge him to accept the offer, the company stood its ground, saying it would stick to its plan to decommission the power station and replace its capacity over time with clean energy.
It indicated it would fulfil its legal obligation to consider an offer but no more.
"AGL is relying on Liddell to generate power for our customers until 2022 and we will require its infrastructure for our replacement plans into the future," it said in a statement.
"Should a formal offer for Liddell be received, it would be given consideration in order to meet our obligations to customers and shareholders."
This riled the government which is simultaneously under pressure from a group of backbenchers calling itself the Monash Forum and led by Tony Abbott to spend up to $4 billion to build a new so-called clean coal power plant in Victoria.
The internal coal campaign, which has leadership overtones, flared ahead of Monday next week when the government will chalk up its 30th negative Newspoll, which is one of the metrics Mr Turnbull used to justify rolling Mr Abbott in 2015.
Mr Abbott said he planned to spend Monday in the La Trobe Valley in Victoria where he and other rebel MPs want the new coal fired power station built.
Treasurer Scott Morrison urged AGL to "act not only in accordance with their own interests but the broader interests of the Australian economy and not be misusing any sort of market position they have to prevent what is potentially a very good arrangement proceeding".
Resources Minister Matt Canavan, who has a prescheduled meeting with AGL executives at Liddell later this week, cast aspersions on the company's motives, given it was unprepared to consider a sale.
"You can only conclude that there may be some other ulterior motives on behalf of AGL for not wanting to sell this asset. I hope that's not the case because I would hope that they're seeking to act in a pro-competitive and market-oriented method, not seeking to foreclose opportunities for other people to compete in the electricity market."
Mr Frydenberg said the company had "a fiduciary duty to properly consider the offer from Alinta".
One minister, speaking on condition of anonymity, likened AGL's American chief executive Andy Vesey, to controversial former American Telstra Boss Sol Trujillo.
"He came here, drove up the share price, inflated his bonus and went back to the US,'' the minister said.
Last month, the Australia Energy Market Operator said closing Liddell in 2022 in accordance with AGL's plans would leave an initial generation capacity shortfall of 850 megawatts, which could mean blackouts for about 200,000 homes in NSW.
But if all three stages of AGL's proposed post-Liddell plan were delivered "the resource gap will be eliminated".
Monash Forum member Eric Abetz welcomed Mr Turnbull's intervention over Liddell and told Sky News that "hopefully it would" negate the need for a new coal plant. But he cautioned all options should be left on the table.
Mr Turnbull said if AGL choose to close it, then they can do so. But it's really a timing issue.
"AGL should do the right thing by their customers, by the community, and I think by their own shareholders, and either keep this plant going for another four or five years and - or sell it to somebody who is prepared to do so."
Alinta chief executive Geoff Dimery said his company was interested in prolonging the life of the Hunter Valley power station for up to seven years but it needed access to the facility to conduct due diligence.
Alinta expressed interest after being approached by Mr Frydenberg and Manufacturing Australia, the members of which are suffering from high energy prices.
Alinta hasn't formulated its offer price but AGL's estimate that it would cost more than $900 million to revamp and operate Liddell for another five years leaves little wriggle-room for an acquirer to cut corners.
The estimate comes from Worley Parson's consulting arm Advisian and covers the expenditure necessary to renew 50 year old boilers and pipes and make them safe to operate beyond the plant's typical life of 50 years. AGL has spent money keeping the plant up to scratch but the main boilers are original and Liddell has failed more often in recent years especially during hot weather.
With Ben Potter
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