It is believed the resignation is due to the decision by the Opposition to support in principle the Government's plans to privatise the power industry, which were outlined late last week. The Opposition came under intense pressure from the Government to clarify its stance during Parliamentary question time last week.

Opposition Leader Barry O'Farrell is to hold a press conference today, which is expected to focus on Mr Debnam's resignation.

Mr Debnam led the Opposition to a disastrous defeat in the last state election, during which the Iemma Government returned to office with an increased majority, despite its deep unpopularity.

Mr O'Farrell is to announce changes to his shadow Cabinet line-up at the press conference, following Mr Debnam's resignation.

"Both Morris Iemma and I reassured the community power wouldn't be privatised [at the last election]," Mr Debnam said, confirming his resignation from the shadow cabinet.

"We both reassured the community it would not be privatised.

"Everything changed once the ballot box changed," Mr Debnam said this morning.

Since the last state election, Mr Debnam has pushed for an increased role for renewable energy in the power industry, but it is believed that last week's decision by the Opposition to support privatisation forced a split with Mr O'Farrell on the issue of privatisation.

Mr Debnam denied he wanted to put power privatisation on the agenda heading into the last state election, to give him spending power by using the sale proceeds, but was stymied by his party.

But party sources said after he was blocked on the issue when he was leader, this left him little choice but to quit once the party changed its stance on power privatisation.