The $3.3 billion HumeLink is expected to become a crucial component in the National Electricity Market by allowing Sydney to draw more energy from southern NSW.
But local communities are worried the overhead 500-kilovolt transmission line will significantly increase the risk of deadly blazes in areas still recovering from the Black Summer bushfires while also cutting through prime farmland.
A parliamentary inquiry will now examine the feasibility of putting major transmission lines underground after a request from NSW Energy Minister Penny Sharpe.
Independent MP Joe McGirr, whose Wagga Wagga electorate will host HumeLink, said after years of discussion, the facts needed to be laid out on the table
"If undergrounding is better for the environment - it reduces the fire risk, it's better for farmland - then we ought to know how much better and are people prepared to pay a bit extra on their power bills to get that solution?" he told AAP.
"Overwhelmingly, people are undergrounding in Europe and California."
The inquiry will examine the costs and benefits of similar projects and what impact a subterranean line would have on the environment and the project's timeline.
Connections to other critical transmission projects, including connections to the state's five renewable energy zones, will also be examined.
The government was committed to delivering the renewable energy transition that NSW deserved "in a way which is cost-effective and environmentally responsible", Ms Sharpe said on Tuesday.
"We are also committed to ensuring local communities are engaged at every stage of the transition," she said.
"This inquiry is an opportunity for everyone to have their say and to understand the issues that need to be weighed up when delivering this infrastructure."
NSW is due to decommission three coal-fired power stations in the next decade, including Eraring in 2025.
The loss of coal-fired power stations from the national grid made it essential HumeLink was completed by 2026, network operator Transgrid has said.
But it has suggested a subterranean HumeLink would cost $11.5 billion - more than three times the price tag for an overland network.
Opponents from the group Stop, Rethink HumeLink say the figure is vastly exaggerated.
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