PLANS by TRUenergy to build a gas-fired power plant in the Latrobe Valley only if it gets extra compensation have been described as ''verging on blackmail''.
The Age yesterday revealed that the energy company was preparing a proposal to build a $2 billion, 1000-megawatt gas plant next to its brown-coal-fired Yallourn power station.
TRUenergy says the new plant could allow the retirement of half the Yallourn station by 2013. It is estimated it would reduce the state's greenhouse gas emissions by 10 per cent.
But TRUenergy said it would make the switch only if the Federal Government boosted its $3 billion compensation offer to Victorian coal stations under a proposed emissions trading scheme to at least $8 billion.
Critics said the extra compensation was unnecessary as gas was expected to become profitable once there was a carbon price. Origin is building a $640 million, 552-megawatt gas-fired plant at Mortlake with no government support.
Environment Victoria campaigns director Mark Wakeham cited a recent analysis that found TRUenergy would get $738 million in free carbon permits for the Yallourn station over the first five years of the emissions scheme.
''They are essentially arguing that the compensation needs to be at least doubled. I don't quite understand why … when they are going to make money out of it for the next 30 years,'' he said.
Mr Wakeham said announcing the plant and demanding compensation a fortnight before the emissions trading bill faces a second vote in the Senate was ''verging on blackmail''.
Bruce Mountain, a director of consultants Carbon Market Economics, said paying additional compensation to brown-coal generators could discourage other companies from investing in gas-fired plants.