The Andrews government announced that 285,000 customers with Origin, AGL and EnergyAustralia on default deals would receive the rebates.

But with energy costs set to rise from January 1 next year, consumers will have to prepare for substantial increases to already soaring power bills.

Non-concession holders on default deals and some expired market offers will receive savings up to $440, under the arrangement struck between the Andrews government and the major retailers. Eligible concession holders will gain up to $720 compared to their power bills without the rebate.

Premier Daniel Andrews said the rebates, which will apply from January 1 next year, would put some fairness back into the energy market.

"We understand that there have been significant price increases that have hurt families, hurt households right across Victoria," he said.

Mr Andrews said the government had made it clear to the retailers it was their "last chance to do the right thing otherwise we would act".

He said the rebates would be welcome to vulnerable consumers on limited incomes. "They do not have the capacity to deal with some of the wild price increases we've seen in recent times."

Mr Andrews said the rebates were "over and above" the increases that power companies would be introducing from the start of 2018.

Earlier this year a review of utilities retailing found that on average Victorians were paying far more than the cheapest prices for gas and electricity.

The review recommended the government step in and regulate power prices.

The Andrews government has yet to release its final response to the review.