The decision to exit the market is expected to affect about 1200 workers in the coal mining town of Collie, 200km south of Perth.
Premier Mark McGowan says coal-fired generation is becoming increasingly unviable as the uptake of rooftop solar and other renewable energy grows.
He says the decision to close the Collie and nearby Muja power plants will reduce government emissions on the South West Interconnected System by 80 per cent.
"Technology is changing," he told reporters on Tuesday.
"And with the uptake of solar and wind and renewables coming on stream in more and more numbers, it means the demand for coal is going down.
"The cost to households and the cost to industry of governments continuing to buy coal is becoming higher and higher. Unless something is done, the cost to each household by 2030 for their annual power bill will increase by $1200."
The Collie power station will close in October 2027 and the Muja station will follow two years later. Both are run by state-owned generator and retailer Synergy.
WA's government, which is developing a 2030 emissions reduction target, had previously outlined plans to retire some of the older units at Muja.
It will invest $3.8 billion in renewable generation across the system in coming years, including more wind power, pumped hydro and batteries.
A further $660 million will go towards transition programs for Collie, including decommissioning the power stations and industry attraction initiatives.
"We want to make sure that Collie remains prosperous and successful," Mr McGowan said.
"We owe it to Collie. They've done a lot for the state over the last 130 years."
The premier said the power plants were increasingly expensive to keep open with huge maintenance costs.
One in three WA households have rooftop solar panels, with the collective power generation output exceeding that of the larger Muja plant.
Existing gas-fired power plants could be activated "virtually instantaneously" to ensure WA had guaranteed baseload power, Mr McGowan said.
The government doesn't intend to construct any more gas power plants from 2030 onwards but has not ruled out doing so before then.
Household power prices will remain capped at inflation until at least 2025.
The decision will not affect the privately-owned Bluewater coal-fired power station near Collie.
Australian Manufacturing Workers Union state secretary Steve McCartney said workers in Collie needed more certainty on transition plans.
"The town of Collie was promised a transition into a new industry. The only thing our members know today is that their jobs are going to disappear," he said in a statement.
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