At 3pm today, emergency services were called to report a fire at the Yallah Transgrid substation on the Princess Highway, about 5km south of Dapto.
More than 100,000 liters of oil are believed to have ignited, which could see the blaze burn for three to four days.
One transformer is fully on with a second transformer at risk.
A total of 16 trucks and 60 firefighters are battling the flames, but no injuries have been reported so far.
“Due to the smoke being considered toxic, affected residents are asked to stay indoors and secure all doors and windows,” a NSW Police spokesperson said.
“It is anticipated that it may take some time before the fire is brought under control.”
“We have closed Albion Park Airport as the plume of smoke is impacting the approaching aircraft,” he said.
According to him, the situation is changing but so far, the emergency services are unable to extinguish the fire.
“At this point, firefighters are unable to fight the fire until confirmation power has been turned off by the electrical authority.”
Transgrid, RFS and Fire and Rescue NSW are trying to establish the best way to put out the fire.
A FRNSW team provides fire protection for the specialists on site.