And it’s not encouraging news.

The company plans to immediately mothball one of the two generation units at Wallerawang and will review the operation of the other later this year.

The Chinese-owned company announced on Thursday it was consulting with its employees, and their representatives, on a reduction in generation from the Wallerawang power station ‘following commercial coal supply shortages and a declining trend in energy demand across NSW’.

Following the completion of an outage at Mt Piper next week it will remove Wallerawang’s Unit 7 from service.

Wallerawang’s Unit 8 will continue to be available until the end of March 2014, at which time it will be placed on a three month recall should market conditions change.

EnergyAustralia said it had held briefings with Wallerawang and Mt Piper employees and their representatives to discuss the operational changes and to begin consultation on how best to manage the impact of the operational changes.

Employees and their representatives were advised that in addition to falls in demand for electricity, high operating costs shaped by lack of affordable local coal supplies had contributed to the less-efficient Wallerawang power station becoming a marginal operation.

General Manager of Mt Piper and Wallerawang, Luke Welfare, said that an acute shortage of commercial coal supplies in particular, had accelerated the need to review operations and introduce changes to Wallerawang’s operating schedule.

“This is a prudent approach in response to ongoing reduction in energy market demand and the high operational costs we incur in operating Wallerawang,” he said.

Mr Welfare said that despite the reduction in output from Wallerawang, no changes to workplace arrangements would be made ‘until the full impact of operational changes on employees and work practices had been evaluated’.

Further briefings and workshops will be held at Mt Piper and Wallerawang in coming weeks to enable EnergyAustralia to consult with employees on how best to adapt both workplaces to accommodate the changes.

“The briefing on changes to operations was a first step in a consultation program we will now run with all employees to clarify exactly what a reduction in output from Wallerawang will mean for our business,” he said.

“It’s very important to us that we consult with our employees and provide them with an early opportunity to determine the best means of managing these changes.”

The spokesman said EnergyAustralia acquired both Mt Piper and Wallerawang in September 2013 ‘with the intent of reviewing and improving productivity and optimising capital and operating expenditure programs for both stations’.

EnergyAustralia has confirmed that employee guarantees and benefits agreed with the State of NSW at the time of acquisition would continue.

Operating arrangements at the Mt Piper power station will continue as normal.

He said EnergyAustralia will continue to monitor its market position as part of normal business practice throughout 2014 and the longer term operation of Wallerawang will be considered as part of the 2015 business planning process in the second half of 2014.