The government proposed compulsory measures to reduce per capita greenhouse gas emissions to five percent below 1989/90 levels, or 7.27 tonnes of carbon dioxide per capita, by 2006/07.

"Each energy retailer in New South Wales including the four government-owned businesses would have to comply with these targets by 2006/07," Carr said in a statement.

"Fines would be introduced for energy businesses that do not achieve yearly reductions."

The IPART report showed greenhouse gas emissions per head from the electricity sector were currently 10 percent above 1989/1990 levels, compared to a target for emissions to be five percent below 1989/90 levels by 2001.

A discussion paper released by Carr on the new proposal estimated compulsory targets would increase the average cost of electricity to customers by around A$1-A$2 per megawatt hour.

"This would mean the average household bill of A$650 a year would increase by an extra seven cents a week or about A$3.60 a year on their current bill," Carr said.

New South Wales last year sought to introduce a national per head emissions reduction target of five percent by 2005/06, and is continuing to look at whether the scheme can be extended to other states.

The federal government requires that all electricity retailers must source an extra two percent of their power from renewable sources by 2010, equating to 9,500 gigawatt hours.

But green groups and some sections of the power industry argue the reforms do not go far enough.

The New South Wales retail market is dominated by the four state-owned companies EnergyAustralia, Integral Energy, Country Energy, and Australian Inland Energy and Water.

A spokeswoman for the largest retailer, EnergyAustralia, said the government's proposal was supported but the issue of how the extra green energy would be sourced would need to be considered.

"We have to look at what is being proposed, but it is one of our critical areas to really ensure we are increasing the amount of green products we have available," she said. "It is something I think all the players in the industry have to take seriously."

Electricity generation accounted for 38 percent of Australia's net greenhouse gas emissions in 1999, not including land clearing emissions and the sector's emissions are on the rise, reaching 133 percent of 1990 levels in 1999.

The Australian EcoGeneration Association said the New South Wales plan would encourage increased use of renewables, cogeneration waste-to-energy and gas fired generators.

"Three years of voluntary targets has not worked, with hardly any retailers meeting their target. It has proved to be a toothless tiger," AEA executive director Ric Brazzale said.

The New South Wales position paper will be available for public comment until February 15.