The cold snap, ageing coal-fired power plants and the Ukraine war are behind the price hikes in electricity bills as NSW consumers are warned of potential blackouts.
"There's huge challenges in the energy sector at the moment", Treasurer and Energy Minister Matt Kean told reporters on Tuesday.
The wholesale price of energy supply is spiking as the war in Ukraine drives up gas and coal prices.
"Because prices have been consistently high over the last week, the price cap has come in to protect NSW customers," Mr Kean said.
The Australian Energy Market Operator (AEMO) has instructed direct electricity generators to provide supplies in order to plug any shortfalls.
The operator warned on Tuesday that NSW could face blackouts from between 5.30pm and 9pm.
The notice comes after the AEMO was forced to intervene on Monday night to prevent widespread outages across Queensland.
AEMO said it has enforced price caps in NSW, Queensland, Victoria and South Australia.
"This is due to wholesale electricity prices reaching the cumulative high price threshold, triggering a $300 megawatt hour price cap under the National Electricity Law and the National Electricity Rules," it said.
Mr Kean says NSW has enough reserve capacity but did not specify how much and for how long it would last if the cold snap continues.
"Obviously there's ... not a lot of slack in the system but the market operator who runs the system they're directing our plant to make sure that we don't have any outages at this stage," he said.
Former Origin Energy executive Andrew Stock says the energy crisis is borne out of a reliance on fossil fuels.
"This crisis has been created by relying on expensive and old coal plants that are due for retirement," he said.
"Energy companies should remember that their wealth was created supplying energy to the domestic market over 40 years. They should be looking after their domestic consumers who ... deserve to be given a break".
But federal Energy Minister Chris Bowen on Tuesday allayed impending blackout fears of consumers, saying the system was coping.
"Nobody is being asked to turn off anything that they need ... certainly nobody should be turning the heating off or anything that's essential," he told ABC radio.
