NSW's infrastructure drive hits roadblock

NSW's infrastructure drive has hit a roadblock, with the competition watchdog rejecting a bid from energy giant AGL to buy two state-owned power stations.

The government had said the sale would have added about $700m to the state's coffers, which would have gone towards infrastructure projects.

However, the Australian Competition and Consumer Commission (ACCC) has ruled AGL's purchase of Macquarie Generation, which owns the Bayswater and Liddell power stations, would substantially lessen competition in the electricity market.

Macquarie Generation accounts for just over a quarter of NSW's energy production.

ACCC chairman Rod Sims said on Tuesday the acquisition would mean up to 80 per cent of the state's energy generation would be controlled by three companies: AGL, Origin and EnergyAustralia.

"This is likely to raise barriers to entry and expansion for other electricity retailers in NSW and, therefore, reduce competition," Mr Sims said.

Treasurer Mike Baird said while the coalition government accepted the ACCC decision, it would still "consider all options" for selling the stations.

"If there is an option that we can bring forward quickly, that makes sense, that is going to be supported by the market, that satisfies the ACCC, we're obviously going to be keen on pursuing that," he said.

But Morningstar analyst Gareth James says that may be easier said than done.

Mr James believes the government may have missed its opportunity to sell-off the assets, which he argues would have been good for taxpayers.

"I think if AGL don't buy this asset, the NSW government could have a difficult time selling the asset at all unfortunately," he told AAP.

Opposition treasury spokesman Michael Daley said the decision was good news for ratepayers.

"Consumers in NSW may well say today, `thank God the ACCC is looking out for our interests because Mike Baird and (Premier) Barry O'Farrell surely are not'," he said.

Mr Daley labelled the sale process another "botched transaction" and called on Mr O'Farrell to "look for a new treasurer".

AGL says it is reviewing the reasons for the ACCC's decision and would decide what action to take.