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Expert urges rethink on Victorian power price rise plan

Victoria's electricity price regulator has been urged to go back to the drawing board after recommending an annual default offer price hike of more than 30 per cent.

The Essential Services Commission (ESC) on Wednesday released a draft decision recommending a rise in the state's default offer of more than $400 a year for residential customers.

It said the typical bill would go from $1403 to $1829 annually and small businesses would face increases of more than $1700 on an average bill.

More than 450,000 customers across the state are on the default offer, which sets a ceiling for the prices users can be charged.

It also represents the maximum amount customers in "embedded networks" - such as apartment buildings and shopping centres - can be charged.

The vast majority of electricity customers are on discounted retail offers.

The proposed default offer increases are primarily due to significant rises in wholesale electricity costs, which have been driven by higher commodity prices, the regulator said.

Victoria Energy Policy Centre director Bruce Mountain said the recommendation was based on the average contract price for electricity over a 12-month span, including last year's price spike from June to October.

He said the extreme contract prices from that time don't accurately portray production costs for the vast bulk of electricity sold in Victoria.

"By using an estimate in that way, they are effectively setting prices at levels that are way above production costs and don't properly represent the prices that the energy retailers paid," Prof Mountain told AAP.

It was likely, he said, only a few smaller retailers would have been exposed to the surge-period contract prices, as many would have waited for the market to cool.

Increasing the default offer could deliver windfall profits to electricity giants that produce their own energy from coal, wind and sun, as their costs are unchanged, Prof Mountain said.

The commission is due to release its final decision in late May and the changes will come into effect in July.

The energy policy expert called on the ESC to reassess its determination, or for the government to intervene if it doesn't.

Victorian minister Natalie Hutchins acknowledged families were facing financial pressures and pointed to the next round of the $250 power-saving bonus on March 24 as a means to ease the burden.

She would not be drawn on whether there was scope for the government to increase the power-saving bonus to make up for the predicted increase.

Opposition Leader John Pesutto condemned the price rises, saying the Labor government had clearly failed Victorians.

The Andrews government has flagged roping in the Commonwealth to help fund the re-booted SEC, which Labor has pledged an initial investment of $1 billion to deliver 4.5 gigawatts of power through renewable projects.

Victoria's energy, environment and climate action department was in January seeking advisers for the commission to help it leverage investment in renewable projects by partnering with suitable co-investors, developers and financiers.