Davis argued that Origin Energy's proposed $1 billion power station would only be viable if the cost of base load electricity from brown coal doubles.

“The evidence is that the cost of generating electricity from brown coal is half the cost of generating electricity from natural gas,” Davis said.

“We have an unlimited supply of energy in the form of brown coal. We have at least 500 years' supply whereas we have a very limited supply of natural gas.”

Energy Industries and Resources minister Theo Theophanous slammed Mr Davis and the Liberal Party for the comments.

"If the Liberal Party was in office their approach would have been to throw out a $1 billion project which will deliver cleaner electricity to Victoria,'' Theophanous said.

Theophanous said the project that would provide 300 construction jobs, improve the state's security of supply and provide a major development boost for south-west Victoria.

Origin’s proposed 1000-megawatt gas-fired power station would be fed by natural gas from the Otway Basin off Victoria and would boost the state's base load generating capacity by 12 %.

If it this station was running today, it would probably not be competitive as base-load electricity can be produced about 30% per cent cheaper from brown coal reserves than from natural gas.

But this political ‘debate’ with the Liberals arguing for cost-effective power and Labor arguing for jobs and clean energy – misses the point. Origin expects to achieve both objectives.

Origin managing director Grant King said the company expected the national electricity market (NEM) to move over the next few years from a position of significant oversupply to a state in which investment in additional base-load electricity generation plants was needed.

Origin won't complete the project until 2008 at the earliest, and believes that the plant will be competitive by then - as gas generation technology improves, environmental costs associated with coal-fired generation rise, and natural gas becomes relatively cheaper, according to King.

"Undertaking the development approval and community consultation processes now will provide Origin with greater flexibility in responding to market conditions as they evolve," he said.

"In addition, Origin's recent gas discoveries in the Otway Basin and significant gas reserves in south-east Queensland provide an opportunity to develop least cost natural gas-fired power stations that minimise environmental impacts, diversify the generation fuel mix in the NEM and enhance system reliability and security."

The approval processes are expected to take place over the next 12 to 18 months, after which time final decisions will be made on the project or projects proceeding.