The Governor of NSW yesterday prorogued state parliament at the request of the Premier, in a bid to block a parliamentary inquiry from being held into the $5.3 billion electricity industry sale.

Advertisement: Story continues below The chairman of the committee due to hold the inquiry, Rev Fred Nile, at the behest of the crossbench members of the committee and the Opposition, decided yesterday on the basis of advice received from the clerks of parliament that the committee could hold its inquiry.

Earlier advice from the Crown Solicitor and also the clerk of the Legislative Council determined that parliamentary committees, apart from statutory committees, cannot function when parliament has been prorogued.

Ms Keneally said the government is concerned the inquiry could affect ongoing negotiations for the sale of further electricity assets owned by the government. These negotiations are not expected to be finalised until early February.

"We are in bidding and negotiation right now with multiple bidders for those assets," Ms Keneally said at a press conference today.

"This is a live transaction process ... it is not yet complete."

She ruled out taking legal action to block the committee's deliberations, saying "that would be a poor outcome for democracy".

"I have confidence in the probity of the transaction," Ms Keneally said. "That shouldn't be derailed by political point scoring."

The committee has "no legal standing to conduct this business, and [it] cannot afford parliamentary privilege to people who appear before them", Ms Keneally said.

The opposition leader, Barry O'Farrell, believed the government was trying to discourage witnesses from attending the inquiry to leaving open the option of a legal challenge.

''What we've seen today is both the Attorney-General and the Premier leave open the option of challenging this inquiry and therefore challenging the privilege which might apply to the evidence of people who might front up,'' he said.

''That's a clear attempt in my view to try to silence witnesses. It's a clear attempt in my view to try to discourage people from attending this inquiry.''