Hydro chief executive Geoff Willis said that the conversion - funded by Duke International - meant one of the two turbines at the station would be gas-run and producing electricity on 1 August. However, this was dependent upon Duke completing its pipelaying phase.

Due to a shortage of rain, Hydro Tasmania has been forced to run the oil-fuelled turbines since early this month, at a cost of more than $100,000 a day.

"We are very pleased with the timing of this machine becoming available to us," Mr Willis said. "We are running one unit on oil and the gas costs are a half of that of oil, so once we get the gas converted the savings will be considerable."

He said the conversion was not the only upgrade for the station, which began operation in 1971.

"The second unit that is running on oil at present is subject to a joint venture arrangement between Hydro Tasmania and the Bell Bay Power Company and the conversion of that unit is due in 2006," he said.

Tasmanian Premier Jim Bacon said the conversion signalled the start of a new era of gas-powered development in Tasmania. "We will no longer be dependent on consistent rainfall to maintain energy supplies," Mr Bacon said.