The owner of Vales Point Power Station has pleaded not guilty to causing a mass fish kill in southern Lake Macquarie in August 2022.
The NSW Environment Protection Authority launched prosecution proceedings against Sunset Power International, trading as Delta Electricity, last September following a 12-month investigation.
It alleges Delta failed to maintain the chlorine dosing plant in a proper and efficient condition.
This resulted in a faulty valve that caused a discharge of concentrated sodium hypochlorite into waters leading to Wyee Bay.
If proven, the offence carries a fine of up to $1 million.
Delta entered a plea of not guilty in the Land and Environment Court on Friday.
A directions hearing will be held on June 28. The matter will be set for trial on a date to be determined.
Several expert witnesses are expected to be called.
The August 2022 incident, which resulted in the deaths of hundreds of fish, including mullet, bream, bat fish, whiting and a juvenile white spotted eagle ray in and around Mannering Park, was the result of oxygen depletion.
It followed an identical incident in the same area a month earlier which was also caused by oxygen depletion.
Hunter Community Environment Centre Coordinator Jo Lynch said Sev.en Energy AG, which acquired Delta Electricity in late 2022, had a track record of extending the life of coal-fired power stations at the expense of community health.
"The effects of Delta Electricity's terrible track record of excessive pollution have degraded local ecosystems for decades, and many wish Vales was the first power station scheduled to close on the lake for this reason," she said.
"Community members are watching this prosecution closely and if Delta is found guilty, they're eager to see the devastation of the fish kill result in tangible improvements in the health of Lake Macquarie's ecosystem."
Environmental Justice Australia lawyer Jocelyn McGarity said the organisation hoped the EPA would fight for strong fines and penalties if Delta is found guilty.
"It should also send a strong signal to the EPA that protection of the community through tighter licencing of this polluting, clunky operator is warranted," she said.
"It's also a timely reminder that at the same time Delta Electricity is being prosecuted, Delta Coal is looking to expand its coal mining operations underneath Lake Macquarie at Chain Valley and Mannering coalmines in order to keep supplying coal to Vales Point beyond 2027."
