Contract negotiations between Hydro Tasmania and the Tasmanian Gas Pipeline company have ended into arbitration three weeks before a gas supply contract expires.
Hydro notified the Australian Energy Regulator of a dispute between the two bodies over gas pipeline access to the Tamar Valley Power Station while TGP develops plans to remove connection infrastructure.
Hydro acting-chief executive Ian Brooksbank said the two companies were yet to reach a commercially negotiated outcome for gas supply to the power station.
He said the power station was an important back-up energy generator for the state, but less gas was being used now due to more on-island generation from other sources.
"In our negotiations, we have tried to achieve the best possible outcome for Tasmanian," Mr Brooksbank said.
"We now consider it is necessary to take this step to safeguard access.
"We remain open to a commercial agreement if appropriate terms are offered by TGP."
Earlier on Wednesday, Tasmanian Gas Pipeline director Lindsay Ward said infrastructure used to connect the pipeline to the power station would be removed and relocated interstate should Hydro not contract pipeline capacity for gas supply.
He said reconnecting the station to the pipeline would take at least two years.
"Reinstallation will require completing the engineering, procurement and construction process together with obtaining the required approvals and funding, prior to commissioning of the new connection," Mr Ward said.
- MATT MALONEY