But customers will also have immediate online access to defined payment options if they warn their electricity company that they may not be able to pay a bill ahead of time.

ESC chair Dr Ron Ben-David said these options should mean fewer people end up in serious trouble with their bills, and that it should result in fewer disconnections.

"The main finding of this report is that too little is happening too late," Dr Ben-David said.

"We're trying to make sure that the assistance offered to customers is tailored to their circumstances," he said.

"We've found cases where the debt is in the thousands of dollars, by which time the customer has no hope."

The ESC's Energy Hardship Inquiry was launched in February to "examine whether energy companies are doing enough to identify consumers struggling to pay bills and whether they have best-practice hardship programs in place to help these consumers," according to a state government statement at the time.

Its draft report was published on Tuesday morning.

Minister for Energy Lily D'Ambrosio called for the review because "the number of consumers being disconnected was too high".

More than 34,000 homes were disconnected from electricity in 2013-14 and 24,000 homes were disconnected from gas.

The record figures represented increases of 36 and 42 per cent, respectively, on the previous year.

"We don't want a community, we don't want a society that continues to sit by and see disconnections increase – that is not a modern Victoria, that is [not] a Victoria that we will tolerate," Ms D'Ambrosio said at the time.

Denise Boyd, Director of Policy and Campaigns at the Consumer Action Law Centre, said the current system was failing Victoria's most vulnerable people and it was good the ESC recognised the need for change.

"We've seen people experiencing family violence, mental health and long term unemployment suffer even further by having their power disconnected," Ms Boyd said.

"We're heartened the Essential Services Commission has recognised the issues associated with energy debt and disconnection and we'll be working closely with retailers, the commission and government to make change happen."

Dr Ben-David said that about a quarter of the customers that had been disconnected last year were taking part in programs with their retailers to try to get out of debt. Little was known about the reasons for the other disconnections.

He said the previous regime for helping customers struggling to keep up with their bills had been too permissive in allowing retailer and customers to negotiate repayments.

"Our predecessors thought 'let's outline the outcomes we expect and then let's give the retailers a broad discretion to find the most efficient way to deliver it," he said. "Discretion has led to confusion."

The draft report suggests a highly structured series of steps that retailers must take when dealing with a customer struggling to make their bills.

In the first instance, the customer can warn the retailer that they will not be able to meet a payment. If they do this before the bill falls due, they can avoid a black mark on their credit history and maintain certain benefits they gain for paying bills on time.

These customers will enter a program to repay overdue bills over the two subsequent billing periods.

People who simply miss a bill without warning will be offered the same repayment schedule, but will have to deal with a negative mark on their credit history and may lose some benefits.

If the customer cannot repay the bill over two billing periods, the repayment period will be extended to five periods.

If this is still not long enough, the retailer must offer an "active assistance plan", which may include advice about how to use less energy, and guidance about government or community programs that may be available to help.

Only after all these steps have been exhausted can a customer be disconnected. To be reconnected, they must be part of a reconnection plan. Reconnection can take place right away, with 28 days granted to negotiate the plan.

That plan will include consultation with a registered party such as the Energy and Water Ombudsman to ensure that it is fair both for the retailer and the consumer.

It will include a "direct assistance package" which could include prepayments or rationing -- referred to as "supply capacity controls" -- such as limits on the amount of electricity used during particular hours, particular appliances or both.

"We are now going to have triggers where the retailer must intervene. We're taking that discretion away," Dr Ben David said. "Because if they don't intervene it's the customer that cops it with debt spiralling out of control."

Victorian Council of Social Services chief executive Emma King welcomed the "general direction" of recommendations in the report, but said prepayment and supply restriction raised concerns.

"VCOSS does not support the use of prepayment metering or supply restriction," she said. "We are concerned that such technologies may be used before other more helpful and effective measures, such as energy efficiency improvements, appliance upgrades and information and training on more effective use of household appliances, have been exhausted."