The about-turn is the Government's first response to plans for a national carbon trading regime.

In a speech today, the Premier, Morris Iemma, will outline the case for the move to gas to supply the next so-called "baseload" power station, which will operate 24-hours a day.

A number of senior members of the Government such as the Treasurer, Michael Costa, support coal as the energy source for the next power station because of the boost it would provide to the coalmining industry.

Coal is the cheapest energy source by far, although a carbon trading regime, which the Federal Government is planning from 2011 or 2012, threatens to make coal much more expensive.

The problem for NSW in recent years has been a lack of sufficient gas reserves to supply prospective electricity industry demand.

"There may well be a sufficient gas supply to make gas-fired baseload generation an alternative to coal," Mr Iemma will tell an infrastructure conference today.