Residents who face weeks without power in storm-hit parts of Victoria will be eligible for a weekly payment of up to $1680.
Acting Premier James Merlino announced the funds on Thursday, a week after storms brought down trees, caused major flooding and destroyed powerlines across the east of the state.
"I've lived in this region my whole life. I've never seen the extent of the damage here in the Dandenong Ranges," he told reporters in Olinda, adding there was "tree debris that would fill the MCG" in the region.
He said some 7000 households remain without power, with the worst-affected suburbs in the Dandenongs — Ferny Creek, Kalorama, Mount Dandenong, Olinda, Sassafras, Sherbrooke, The Basin, Tremont and Upwey — expected to be off the grid until July 10.
"The depth of winter and weeks and weeks without power — this is an unprecedented emergency," Mr Merlino said.
He said the current disaster relief payments on offer don't cover the situation.
Prolonged Power Outage Payment for storm victims
Instead, a Prolonged Power Outage Payment of up to $1680 per week will be created for all eligible households without power from Thursday.
The payment will be administered by Ausnet and will help families buy the basics and find alternative accommodation for the next three weeks.
Mr Merlino says he expects the payment will be jointly funded by the state and federal governments.
It is in addition to the Emergency Re-establishment Payments, announced on Sunday, worth up to $42,250 for households if their property is uninhabitable or inaccessible for more than seven days.
More than 1800 homes have been assessed so far, with 119 properties considered uninhabitable and 112 damaged.
Bushfire Recovery Victoria will take the lead in coordinating the clean-up and recovery, while a small group of Australian Defence Force members will arrive in the Dandenong Ranges and Traralgon, in the Gippsland region, on Thursday to assess the damage.
A further request for ADF support will then be made.
Federal member for Gippsland Darren Chester has urged the state government to call in troops to help clean up the damage.
"Please don't send us bureaucrats with clipboards, we need soldiers with chainsaws," he said.
State emergency as Yallourn coal mine at risk of flooding
Meanwhile, a state energy emergency has also been declared due to fears the Yallourn mine, in the Latrobe Valley, could flood.
The open cut, brown coal mine sits adjacent to the Yallourn power station, which supplies up to 22 per cent of Victoria's electricity.
Energy Minister Lily D'Ambrosio said cracks had formed in the mine due to the significant rise in water levels in the Morwell River putting additional pressure on its walls.
"If they are breached, (it) will mean that not just the mine, but the power station would be unavailable, significantly curtailed, if not totally unavailable for months to come," she said.
Urgent repairs are underway.
Yarra Ranges residents told not to drink tap water
Emergency Management Commission Andrew Crisp urged Melburnians, who will be free of coronavirus travel restrictions on Friday, not to visit the storm-affected regions.
"My strong message to anyone that is not a local, that does not live up here, stay away," he said.
"You'll be getting in the way of all the great work trying to clear the roads."
Meanwhile, residents of Kallista, Sherbrooke and The Patch in the Yarra Ranges have been told not to drink tap water, even if it is boiled, due to contamination.
It is expected the warning will remain for two more days.
Two people died in the dangerous storms last week, with minor flood warnings still current for the Latrobe, Thomson and Yarra rivers.
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