Last week, Industry Minister Ian Macfarlane warned the states they could lose $740 million in annual competition payments if they refused to toe the line on energy reform, which includes a national energy regulator within Australia's competition watchdog, the ACCC.

However, the threat to cut competition payments provoked a backlash with energy ministers from South Australia, Queensland, NSW and WA all accusing Mr Macfarlane of abusing federal powers.

The commonwealth's agenda to have NSW and Queensland privatise their electricity assets drew particular scorn from South Australian Energy Minister Pat Conlon, who said it was nothing short of vandalism. "To threaten to use taxing powers to force states to privatise assets is little short of vandalism," he said.

The final report of the Council of Australian Governments energy market review, headed by former resources ministers Warwick Parer, which was handed down 10 days ago said reforming Australia's energy market would see GDP grow by about $2 billion a year by 2010 - an annual increase of 0.5 per cent.