The Collie-based miner is paid $40 a tonne for the coal it supplies to Synergy, but is seeking more than $10/t more in order to remain viable.

The West Australian is reporting that Synergy is offering Premier just $7/t more. There are also talks of a trade-off between Synergy and Premier in the event of a price rise.

If the issues remain unresolved, the ramifications may be seen throughout WA, with Collie Coal has producing more than 50% of the South West’s electricity in recent years.

Premier is the sole coal supplier to Synergy, which generates the predominant share of coal-fired power in the South West’s grid.

Any price rise would need to be recovered from higher retail electricity prices if the state is to avoid a hit to its bottom line.

Yancoal purchased the embattled Premier for a hefty $300 million in 2011. Critics have since argued Yancoal payed far too much considering the low price that Synergy is obliged to pay per tonne of coal.

It is understood that Premier is currently selling coal to Synergy at a loss - a situation worsened by the deteriorating quality of the coal deposits being mined.

Energy Minister Mike Nahan said last week that a solution to Premier's situation must be found soon. He acknowledged the severity of Premier's plight, saying he was "acutely aware of the challenges" faced by it and fellow Collie coal miner Griffin.

Under the contract terms, Synergy has the right to manage mining if Premier is unable to do so.

However, both Synergy and the state government are reportedly reluctant to do so.