AGL's Liddell power station in the foreground and the Bayswater plant behind. Credit:Simone De Peak The concerns were serious enough to be raised with both the federal and NSW governments. Any supply crimp would also have contributed to higher wholesale prices. Part of the squeeze came from power stations ramping up generation to fill the gap created by the exit of the vintage Hazelwood power plant in Victoria in March. Rising export demand, though, reduced the ability to access more coal. "This does place pressure on the Hunter coal supply chain, and on one of the busiest rail corridors in the country," an AGL spokeswoman said.

Eraring, owned by Origin Energy, is the country's largest coal-fired power station. Credit:David Stewart "Due to these constraints and the unprecedented demand for black coal generation the coal stockpile at the Macquarie site fell to historic lows over the winter period." Coal rationing AGL briefed both the Australian Energy Regulator and the Australian Energy Market Operator about the supply issues. The company briefed Prime Minister Malcolm Turnbull, Deputy PM Barnaby Joyce and Environment and Energy Minister Josh Frydenberg during last Monday's meeting in Canberra.

It's understood the ministers spent little time discussing the supply issues, and instead focused on their main objective of the meeting: the attempt to force AGL to extend the life of the ailing Liddell plant five years beyond its scheduled closure in 2022, or sell the 1680 MW plant. AGL promised only to present a plan within 90 days showing how it would make up the capacity shortfall once the plant "retires in 2022". In last Monday's briefing, AGL is understood to have told the government that the twin Hunter plants had been forced to ration coal since October 2016. Efforts now were focused on ensuring any fuel constraints are minimised for summer when rising demand is expected to tighten the market further. The coal squeeze "probably explains why capacity factors of NSW generators have been, on average, lower than both Queensland and Victoria," Hugh Saddler, an honorary associate professor at the Australian National University, said.

'Aware' of the issues "The federal government is aware of issues regarding the transportation of coal in NSW," Mr Frydenberg told Fairfax Media. "[AEMO] remains focused on ensuring adequate electricity generation [this] summer. "[T]he generators and the rail operator are working co-operatively to ensure the availability of coal." According to one industry source, the priority for rail freight goes to exporters because export coal prices are higher than domestic ones. For instance, should a train fail, the supply shortfall is filled first for exports, a practice reinforced by the mines and Port of Newcastle's sway over the rail network. A spokesman for the Australian Rail Track Corporation, which operates the Hunter Valley Coal Rail Network, said there is sufficient capacity "to meet the contracted coal volume needs of our customers, in line with the operating protocols of the Hunter Valley coal chain".

"It is a busy mixed-use rail network, but we work closely with our customers and the broader coal supply chain regarding inventory levels and where demand for volumes over and above these needs are required," he said. NSW Energy Minister Don Harwin said the supply issue "has been looked at closely by the Energy Security Taskforce", a group set up in the wake of last February heatwave that pushed the state to the brink of blackouts. "Fuel supply is improving in the lead-up to summer," Mr Harwin said. "The NSW Energy Security Taskforce is aware of the issue and we are carefully monitoring fuel supplies." 'Ridiculous' NSW Labor's energy spokesman Adam Searle said the government "has no plan to address the potential coal shortage at NSW power stations".

"It would be a ridiculous situation if coal-fired power stations in this state had difficulties obtaining a reliable supply of coal," he said. That would amount to "a real market failure" not unlike Australia's gas market where the development of an east coast export market had resulted in a domestic supply squeeze that had sent prices soaring, he said. For Origin's Eraring, the supply squeeze was also linked to the limited capacity for freight on the busy Newcastle-Sydney rail line. Those issues had now eased. "NSW coal generators including Eraring ran very hard to meet demand over winter, and this used up substantial coal supplies creating an issue with coal stockpiles which now needs to be managed," Mr Jarvis said. "We have sourced additional coal supply to replenish stockpiles and in September we expect record coal deliveries by rail to Eraring. "We have forecast higher output from Eraring in [financial year] 2018, with generation expected to be 5-10 per cent higher than the prior year," he said.