AGL Energy has categorically rejected arguments from the Turnbull government that it is abusing its market power, saying if it wanted to benefit commercially from the closure of the Liddell power plant it would have shuttered the facility with no warning.

An AGL spokesman hit back at an accusation from the former deputy prime minister and Nationals leader Barnaby Joyce that it was “shorting” the market by hanging on to the ageing coal-fired power plant. “It is not possible to short a market by giving seven years’ notice of closure,” the spokesman said.

“If AGL’s intent was to benefit from the closure of Liddell, AGL would have provided no notice of closure.”

Pushback from the energy company that once again finds itself at the centre of a political storm about energy policy comes as the chief executive of the Australian Energy Market Operator, Audrey Zibelman, says the electricity market in New South Wales would benefit from more competition.

In an interview with Guardian Australia, the Aemo chief said a signal from the Hong-Kong owned Alinta Energy that it would like to buy the Liddell facility and extend its operating life beyond 2022 was positive, and a sign the energy market was working.

The Turnbull government has been attempting to ratchet up public pressure on AGL for months to extend the life of the NSW coal plant until an expansion of the Snowy Hydro scheme is completed – but AGL has its own plans for the site.

The company wants to shut down Liddell in 2022 and replace it with renewables, batteries, gas power, upgraded coal power and demand response.

In an effort to push past AGL’s hard-baked resistance, the government has over the past few days brokered a potential offer by Alinta, a company which has ready access to capital, and is looking to expand its market share.

In a further sign AGL does not plan to change course, its chief executive, Andy Vesey, told Fairfax Media interference in the market would raise issues of ‘‘sovereign risk’’ that could deter investment in new energy assets.

When approached by Alinta, Vesey told it AGL was “not in the process of selling, so there is no process’’, although has since said publicly it would take any offer to its board for consideration.

Zibelman said it was not the role of the energy market operator to determine which company should deliver the capacity required in the market, but to ensure sufficient capacity was available in the event the Liddell plant was retired. “We are agnostic. Our concern is making sure the kit is there.”

But echoing a similar observation from the head of Australia’s competition watchdog, Rod Sims, prompted by the potential Alinta bid for Liddell, Zibelman said the energy market in NSW would benefit from more competition.

“I think that any market benefits from more competition. I think about it from the perspective of what’s the value of competition – multiple players looking to drive value to consumers,” the Aemo chief said. “When you have more players doing that, then consumers benefit”.

She said Aemo had given advice to the Turnbull government last month that an environment needed to be created encouraging multiple competitors to bring forward options to supply the market in order to prevent a shortfall occurring if Liddell exited the system, and if AGL failed to deliver all the elements of its transition plan.

“The market is open now and the fact is anyone could come in. Aemo has identified a gap, we don’t need a government process of any type to allow anyone to come in and say, ‘I’d like to fill that gap,’ to put up their hand, and put their money at risk,” Zibelman said.

“When Aemo is talking about competition and the benefit of competition, it’s to say we need someone, various parties, to put their hand up and come in and be willing to essentially offer to meet the supply need in the market.

“One way that could be met of course is for someone to come in and say they are happy to purchase the Liddell plant and keep it open. That’s one way the gap could be met.

“That’s good, that’s the market working. I don’t think it precludes anyone at this point from doing other things, it’s just the process of the market responding to an identified gap.”

While the Turnbull government focuses on extending the life of Liddell, the Monash group of Coalition MPs has called for consideration of a new coal power plant.

The chief executive of Snowy Hydro, Paul Broad, has warned the government would “do their dough” if they bowed to this pressure, backing treasurer Scott Morrison’s view that the economics of a new coal power plant do not stack up.