The regulatory body said the proposed acquisition would likely result in a substantial lessening of competition in the commercial electricity market in New South Wales.

After initial concerns were raised by the ACCC, AGL said it would commit 500 megawatts worth of hedge products to competitors with the obligation applying to every trading interval for a period of 4.5 years.

It was not enough, however, with the ACCC remaining steadfast in its opinion that the acquisition would likely result in a significant reduction in hedge market liquidity and the supply of competitively priced and appropriately customised hedge contracts to second tier retailers.

The ACCC noted that if the acquisition were to occur, AGL would become the largest generator in NSW, Victoria and South Australia, owning 70-80% of electricity generation when combined with the other two largest retailers Origin Energy and Energy Australia.

The key assets of Macquarie are its Bayswater and Liddell power stations, which together account for 27% of NSW capacity.

AGL is reviewing its options in response to the decision.