Power has been restored to over 80,000 homes in south-east Victoria after a fire in high-voltage power lines near the Hazelwood power station this morning.

A spokesman for electricity provider SP AusNet described the incident as a "flashover" caused by the power lines going down.

The incident was not at the plant itself but at a nearby terminal and it sparked a small grassfire, which was quickly put out.

SP AusNet spokesman Jonathan Geddes said the incident happened when "several powerlines came down at the Morwell terminal station".

Roads around the scene of the Morwell terminal station were closed as repair crews moved after the outage. ( ABC News: Stephanie Anderson )

"The station plays a significant role in distributing electricity throughout Gippsland, so when the powerlines have come down it's caused a flashover, which is typical in the electricity network," he said.

"That's what people are reporting as an explosion.

"It is not really an explosion - it is just a flashover, and that resulted in a widespread blackout in Gippsland, possibly 80,000 customers."

About 100 customers were still without power around midday (AEDT).

Photos and videos posted on social media showed a series of bright flashes at the Morwell terminal station, near the coal-fired plant, about 7:30am.

ABC reporter Brett Millson told ABC News Breakfast that about 80,000 homes across the Gippsland region had been left without power.

What is a flashover? An electrical flashover or an arc flash happens when a current leaves its intended path and jumps from one conductor to another.

An electrical flashover or an arc flash happens when a current leaves its intended path and jumps from one conductor to another. It can be caused by dust, condensation, material failure or corrosion.

It can be caused by dust, condensation, material failure or corrosion. The pressure waves from an arc blast can be felt within a radius of several metres.

The pressure waves from an arc blast can be felt within a radius of several metres. The bright light can cause blindness and the sound of the blast can cause hearing loss.

Witness Jaye Atlee, who filmed the incident, described it as looking like "a type of electrical storm".

"I've never seen anything like it. It was a bit of a glow and a really loud rumble," she said.

"I was getting ready for work and I heard the rumble through my house. I thought my house was on fire or something was happening.

"All the electricity dimmed and turned off and I ran outside and looked over the back of the balcony and there it was.

"I was a bit scared at first. It went on for about a minute and stopped.

"It looks pretty calm now; you can't tell anything's happened. It looks a bit hazy but it's what we've been used to really."

Local resident thought cloud came from 'atomic bomb'

David, a caller to ABC local radio in Melbourne, said he heard a deep rumbling sound as he was standing outside his property.

"It was a massive, deep, rumbling, arcing noise and then all of a sudden I saw this massive fireball," he said.

"It looked like a mushroom cloud going up and you could see the electrical arcing that was going through the cloud.

"At first I thought we were under attack from an atomic bomb."

A fire burned in the nearby Hazelwood open cut coal mine for 45 days earlier this year and forced the evacuation of some residents.

David said that was bad enough.

"We're still going through that dreadful fire because... our house gets full of smoke in the evening," he said.

"Now we've got this to contend with."