AGL Energy will reportedly challenge the rejection of its bid for NSW state-owned electricity firm Macquarie Generation.

The Australian Financial Review says the company is gearing up to inform NSW Treasurer Mike Baird that is does not accept the Australian Competition and Consumer Commission's decision to reject its offer for the power company.

The AFR says AGL made a successful bid for the generator, offering $1.505 billion over smaller company ERM Power, but the takeover has been blocked by the consumer watchdog.

ASIC says it would limit retail competition, increasing prices for everyday customers.

The Fairfax Media outlet claims “most factors” suggest AGL will seek to take the matter to court, and ERM is considering boosting its bid, if it can find further financing.

The sale has been opposed by the Electrical Trades Union, United Services Union, Public Service Association and Professionals Australia, through a campaign called ‘Stop the Sell Off’. 

Opponents say the sale is just a way to secure quick cash to be used on needless infrastructure projects.

The groups against the sale say the long-term damage to NSW revenue will severely impact future generations.