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Verve Energy's troubled $250 million bid to revive its 47-year-old Muja AB coal-fired power station hangs in the balance, with Energy Minister Mike Nahan warning the Government may pull the plug on the costly exercise.

Although it would come at significant political and taxpayer cost, Dr Nahan said that all options were being considered as part of a tough, sweeping review of his new portfolio.

"The Government is still considering its position in relation to Muja AB," he told _WestBusiness _.

"There is no doubt that the project has not gone according to plan, but as yet there has been no final decision as to its future.

"The whole process disappoints me to the extreme. It is one of those issues that give you nightmares."

"We are resuscitating old kit. It looked good early on, but it's turned into a sow's ear."

Verve declined to comment, but the Government faces an unenviable decision on whether to fund what Treasury describes as a multimillion-dollar rescue mission while risking throwing good money after bad.

But shadow energy minister Bill Johnston said the Government only had itself to blame, claiming former energy minister Peter Collier and Premier Colin Barnett were warned in 2009 that the venture was a risky way to safeguard power supplies in the wake of Apache Energy's Varanus Island gas explosion.

That $2.4 billion blast cut a third of WA's gas supplies for months, crippling industry and threatening power supplies.

"The problem was the Government made a bad decision to refurbish a 40-year-old-plus plant," Mr Johnston said.

"It is not a question of coal versus gas, it is a question of common sense versus no sense. It was the wrong approach right from the start when it was originally said to be creating a power station backup in the case of a major gas outage.

"But the lessons learnt out of the Varanus Island explosion, including the Mondarra storage facility, mean that if it happened again there wouldn't be the same type of impact. In addition there are some risks you can't insure against, and $250 million for an insurance policy is a lot of money."

_WestBusiness _revealed this week that Verve's private sector partner in the project, Geelong-based Kempe Group, had sought to distance itself from the development, with two key executives resigning from the joint venture's board.

Kempe has so far failed to sell its 50 per cent stake, raising doubts about Verve's claims that its liability will be capped at $150 million.

From the outset the Muja revival has been beset by woes. Last year a boiler explosion during operational trials forced a re-think of the project and a cost blowout of $102 million. But the extra money was not enough to fix the problem.

Treasury has received a report on the debacle, but Dr Nahan said he had not received a full briefing.