AGL would be required to give an extra 18months notice of its intention to close Bayswater Power Station under a rule change proposed by the federal government.
Under present rules the company, which expects to close the plant as early as 2030, will need to formally advise the government by mid-2026. However this would be brought forward to early 2025 if the change is implemented.
Energy Minister Angus Taylor said the rule change was necessary to ensure there was enough time for new projects to be built to replace closing power stations.
"It is critical to ensure there is a pipeline of projects that can be delivered to replace existing capacity, keep the system reliable and secure, and keep power prices down for Australian households, businesses and industry," he said.
"This is a sensible change and necessary to ensure the national electricity market remains reliable and secure."
The proposal comes after Origin Energy announced in February that it was closing Eraring power station, the largest coal-fired power plant in the country.
The energy company said the power plant would close by August 2025, seven years early, with Origin providing the required 3.5 years notice to the Australian Energy Market Operator.
The Australian Energy Council's Chief Executive, Sarah McNamara, said generators were already required to provide an indicative retirement date which is published by the market operator.
"Whilst they may look initially attractive, long firm notice requirements have complex and potentially counterproductive impacts. For example, they may force a generator to publish a firm date long before the operational circumstances of the plant are clear. As conditions change, inevitable adjustments will occur, that in turn can lead to a loss of confidence in the information.
"It should be recognised that generators, like any business operation, are subject to many unknowns and risks that such a rule cannot address. For example, plants may have physical failures or may be required to unexpectedly cease operations due to health and safety or environmental regulations.
"Company directors also have obligations under the Corporations Act 2001 in relation to operations that have become unexpectedly uneconomic.
"All of these issues would limit the effectiveness of such a rule."
The government's other proposed changes include new measures to prevent energy companies mothballing generators indefinitely to avoid being subject to the notification period for closures.
Long-term mothballed plants would be defined as being closed for more than nine months of the year.
