Electricity prices in NSW won't go down until the prime minister changes federal regulations and allows a wage cap for electricity workers, NSW Premier Barry O'Farrell says.
A Productivity Commission report released on Thursday called on the NSW government to trim about $1 billion in costs from the electricity network.
It suggested full privatisation of the network and the introduction of more competition.
The report confirmed there was over-investment in the sector and highlighted problems in the 'industrial situation', Mr O'Farrell said.
'The 2.5 per cent state wages cap should apply to the energy companies, but Fair Work Australia won't agree to that,' he told reporters on Thursday.
He also said the state government had a duty to crack down on waste and mismanagement.
Mr O'Farrell added the federal government wasn't interested in helping to reduce the cost of electricity in NSW and was only paying lip service to the issue because of the upcoming election.
'This is a federal government that's not interested in solving the problem. It's interested in winning the next federal election,' he said.
'Until such time as (Prime Minister) Julia Gillard agrees to change the federal regulatory arrangement, it's hard to see this (report) providing an immediate benefit to anyone across the state.'
But Greens NSW MP John Kaye said selling the state's remaining electricity assets would do nothing to address the overinvestment in infrastructure driving up power bills.
'The Productivity Commission's recommendation to undertake further privatisation of the electricity industry is a case of ideology getting in the way of common sense,' he said.
Dr Kaye said it made more sense to reduce demand through efficiency.
'Public ownership is crucial to reforming the electricity industry to reduce power bills, drive down carbon emissions and retain a secure supply,' he added.
Electrical Trades Union (ETU) NSW secretary Steve Butler said blaming wage costs was a 'cheap shot'.
He said the government should reduce the dividend it took out of electricity to bring prices down.
'This government takes a $1.5 billion dividend out of electricity in NSW (and) each customer pays up to $370 per year for that dividend,' Mr Butler told reporters in Sydney on Thursday.
'What I call on this government to do today is reduce that dividend and reduce power prices, and do it today.
'You'll see power prices come down from the next bill people get if he amends his dividends.'
He said the Productivity Commission 'got it wrong' because there was no evidence that privatisation would reduce electricity costs.
Mr Butler said any sell-off would likely be overseas, putting jobs and reliability of the electricity network at risk.