The federal government's budget announced future plans to buy some or all of NSW's near 60 per cent stake in the Snowy Hydro power company as part of a major expansion of the historic scheme to include new forms of electricity generation.

NSW and Victoria jointly own about 87 per cent of the shares in Snowy Hydro Limited, a stake that could be worth $5.5 billion.

The state's opposition leader, Luke Foley, said on Wednesday that if he were elected Premier in 2019 he would support the sale, but only to direct the proceeds to regional areas.

"Regional communities [are] crying out for infrastructure," Mr Foley said while appearing in Queanbeyan. "All of the four to five billions dollars [the NSW government] receives ought to be allocated to building schools, hospitals, roads and water security infrastructure across regional NSW."

Mr Foley further added that Labor would only back a sell-off if the scheme remained permanently in public hands and protection of the environment and water rights were secured post-sale.

Premier Gladys Berejiklian declined to match Mr Foley's plan and said the government was already spending record amounts on infrastructure in regional NSW.

"Any decision the NSW Government makes on the Snowy Hydro transaction will be in the best interests of the people of NSW and the local community," she said.

The Premier has declared herself "extremely interested" in the idea of a sell-off but she has rejected a federal proposal that would force NSW to invest the proceeds in infrastructure determined by federal government priorities.

The federal government buyback plan would pave the way for a $2 billion expansion of the scheme to include electricity generation and storage, which could power half a million homes.

The plan would develop a "pumped hydro" system for pushing water up and down a new extensive network of tunnels.

Pumped hydro involves running water uphill when demand for power is low and releasing it when demand peaks, allowing extra power to be generated from hydroelectricity when acutely needed.

About one-third of the total proceeds from the state government's sale of the state's "poles and wires" electricity assets, a figure in excess of $22 billion, will be spent in regional areas, according to state government policy.

"This government is spending record amounts on infrastructure across regional NSW through our asset recycling plan - something Labor has consistently opposed," the Premier said.

Mr Foley campaigned hard against the electricity privatisations during the 2015 election campaign but soon after declared the matter "settled".

A feasibility study on the pumped hydro project should be complete by year's end.