The closure of Australia's dirtiest coal-fired power plant in Victoria next year could force up prices interstate and will have a "major impact on supply", Federal Energy Minister Josh Frydenberg says.

Modelling released by the Victoria Government showed the potential for power prices in Victoria to rise by between 4 and 8 per cent after the shutting of the Hazelwood power station, planned by the end of March next year.

The modelling, obtained by the ABC, estimated the average residential power bill would rise by $44 per year.

Mr Frydenberg told Lateline the station's closure means Victoria would have to import electricity — black coal from New South Wales and hydro power from Tasmania.

"I think there will be a price impact in neighbouring states as well because there won't be that cheaper form of generation, particularly brown coal, which is what Hazelwood does produce, going into those other states," he said.

"And the minute you start supplying either black coal or gas or renewables, costs do go up."

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 7 minutes 19 seconds 7 m Power station Hazelwood to close ( Madeleine Morris )

Hazelwood's closure will take out 22 per cent of Victoria's capacity which, the Minister said, will have national consequences.

"The closure of Hazelwood will have a major impact on supply, not just in Victoria but also across the national electricity market because Hazelwood made up about 4 per cent of supply across the national electricity market, helping to supply power into South Australia, into Tasmania, and also into New South Wales," he said.

"Victoria will now go from being a net energy exporter to becoming a net energy importer and at times of peak demand,"

"For example in the January/February period in 2018 after the closure — in the hot summer months where there will be increased peak demand — very close attention will need to be taken to ensure that there is the stability and security of supply.

"This could include additional measures, not just market-based measures, but additional measures from AEMO (Australian Energy Market Operator) in order to elicit sufficient generation."

Mr Frydenberg said while the Victorian Government had predicted a rise of up to 8 per cent in power prices, "the impacts might be slightly less in other states".

Closure could signal renewables investment

Hundreds of jobs will go when the plant, deemed by French owner ENGIE to be no longer economically viable, closes in March next year.

Hazelwood has been a major source of jobs and income in Victoria's east but environmental groups have long been calling for its closure.

Environment Victoria chief executive Mark Wakeham said he empathised with workers who will lose their jobs, but the plant's closure was long overdue.

"We're likely to see significant investment in new renewable energy projects [in Victoria]," he said.

"It will send a signal to the market that we need more renewable energy projects that will deliver a lot more clean energy, a lot more jobs."

ENGIE said it would fully rehabilitate the mine and turn it into a lake to be handed back to the community in 2023.

The Climate Council's Professor Tim Flannery said it showed how Australia urgently needed a comprehensive national energy policy to help communities such as the Latrobe Valley deal with the transition away from coal.

"You'd have to say globally coal is in eclipse. New forms of energy generation, much cleaner forms, are becoming cheaper by the year," he said.

"I suppose one of the saddest things for me about this decision is it's been made effectively in France rather than in Australia."