Energy giant AGL would face heavy penalties and a possible class action under changes proposed by Coalition backbenchers who want the company punished for refusing to sell the Liddell power plant.

The push sets up a potential new front in government infighting over energy policy, as electricity reliability and affordability loom as big issues at the next federal election.

AGL on Monday announced it had knocked back a $250 million bid by Alinta to buy the ageing Hunter Valley plant and would close the operation in 2022 as planned. The Turnbull government had exerted pressure on AGL to sell, saying it would increase competition, lower prices and shore up east coast energy supplies.

Backbench Coalition MPs want AGL to face legal sanctions for refusing to sell the Liddell coal plant. Credit:Jonathan Carroll

At a joint party room meeting on Tuesday, pro-coal Liberal MP Craig Kelly is believed to have called on the government to amend competition laws to prevent companies that provide “essential services” from acting uncompetitively. It is understood former prime minister Tony Abbott and former Nationals leader Barnaby Joyce backed the proposal.