The proposal to build an underground steam and electrical power plant on the Brooklyn waterfront suffered a major setback Wednesday in an Albany ruling that is raising questions among industry experts about whether it is even possible to build a new independent power plant in New York City.

Two state judges ruled that TransGas Energy’s most recent application should be dismissed, and reaffirmed an earlier recommendation that the state siting board deny its earlier application to build a large, 1,100-megawatt facility on the Bayside Fuel Oil Depot site in Greenpoint. The state siting board, made up of panelists of several state agencies, must now decide on the application.

The ruling posted on the Web site of the Public Service Commission Wednesday questioned the economic feasibility of the power plant and whether the plant could obtain the necessary water from the city, and called the amended application incomplete, among other reasons.

A spokeswoman for the Public Service Commission, Anne Dalton, said she was unable to explain the decision or name any employee of the commission who could.

The owner of TransGas, Adam Victor, called the judges’ decision “stupid,” “irregular,” and “irresponsible,” and he vowed a lengthy, costly legal battle in both state and federal courts if the siting board denies the application.

The project manager for TransGas, Len Shapiro, said there could have been political interference in what, he said, is supposed to be an independent process.

“Some pressure came from somewhere. This reeks of somebody saying, ‘Get this application out of here,'” Mr. Shapiro said.

The Bloomberg administration has aggressively opposed the power plant, saying it conflicts with the city’s plans for a revitalized Brooklyn waterfront that would complement a recently rezoned swath of Greenpoint/Williamsburg, where the city envisions denser commercial and residential development. Mr. Bloomberg has dedicated funds and begun the land acquisition process to transform the heavily contaminated East River site into a 28-acre park.

Council Member David Yassky, a Democrat of Brooklyn, said he hoped the latest decision would end Mr. Victor’s persistent quest to get approval for the plant. “At some point, you have to take no for an answer, and TransGas has been told no time after time after time,” Mr. Yassky said.

Last month, in an article in The New York Sun, Mr. Victor criticized Governor Pataki for not exercising “leadership” and shepherding the project to approval. Mr. Victor says the plant would provide the city much-needed energy supply, stabilize prices, allow for a quicker mechanism for restarting the electricity grid if a blackout occurs, provide a backup heat source for Manhattan, and create jobs. He said the facility would be the most environmentally friendly power plant to date.

The TransGas application is the last remaining New York project proposed under Article 10, a state law designed to give the ultimate authority on power plant siting to an independent commission to lessen the influence of local politicians on decisions about locating the unpopular facilities, and to streamline the approval process. Article 10 expired about three years ago, and a growing amount of business and real estate groups are advocating a reconstitution of the law to help cope with what many see as a looming electricity shortage in New York City.

The New York Building Congress released a report in January that said the city would need to add about 3,000 megawatts of electricity before 2010 or 2011 to avoid a shortage. The primary policy recommendation of the report was to reinstate Article 10.

The chairman of the New York Affordable Reliable Electricity Alliance, Jerry Kremer, said the state’s recent decision on the TransGas proposal shows that siting a new power plant within the five boroughs has become an impossible hardship and a deterrence to prospective applicants. He blamed “NIMBYism,” which he said is more prevalent in the city than elsewhere.

“The message over the years has been that you can’t get a job done in this city, yet the city needs the power,” Mr. Kremer said. “Almost anyone who wants to build a power plant in this city is going to hit a brick wall.”

He continued: “Is there any place in the city where the mayor’s office would allow a facility? The answer is probably no.”

The city suggested that TransGas use a nearby site owned by Exxon Mobil for its proposed plant, but Mr. Victor said the site was unavailable because it is under litigation. He said the city has offered him no other real options.

A senior policy analyst for the New York Public Interest Research Group, Jason Babbie, said the TransGas plan would have harmed the air quality in the area. He said his organization favors “re-powering” of existing facilities, and it supports more local influence of power plant siting.

“We may need 1,000 megawatts, but to say that every proposal in the queue should go forward is inappropriate,” Mr. Babbie said.