Australia's largest energy supply retailer, AGL, has announced Crib Point on the Mornington Peninsula as its preferred site for a gas import jetty and pipeline.

The company said the move would increase energy security and supply for customers in the south-eastern states of the country.

It is hoped the $250 million plan will be under construction by 2019 and operating by 2021.

The Victorian Government said it was confident the Crib Point project would increase reliability within the state's energy supply and ultimately reduce prices.

It entered into negotiations with AGL late last year about a possible location due to its concerns over increasing energy prices and the prospect of summer blackouts.

The company is now set to discuss the viability of the plan with the Andrews Government and local authorities within the Crib Point area.

AGL said it was looking to modernise and decarbonise the energy system.

In a statement, AGL executive general manager Richard Wrightson said the company still had a significant amount of work to do before construction of the project could go ahead.

"This doesn't signal the end of the feasibility studies for the proposed site but now accelerates the process," he said.

"We look forward to ongoing consultation with the local community to answer their questions and proceed towards a formal application to the Victorian Government."

It is believed the company selected Crib Point due to its existing infrastructure and existing industrial port facility and pipeline network.

The company also noted that it was wary of proposed carbon-restricting legislation.

"As Australia transitions to a carbon-constrained future, AGL is looking at how best to modernise and decarbonise the energy system," a statement from the company noted.

"This project will enable access to the world market for gas, injecting some much-needed competition into the Australian market and help ease the tight gas supply."

Energy Minister Lily D'Ambrosio said the Government would continue to work closely with AGL "as we boost the reliability of our gas supply".

"This project has the potential to be a real game changer for our gas market, allowing the importation of cheaper gas to help drive down energy prices and create jobs," she said in a statement.

Mornington Shire Council has been contacted for comment.

AGL has returned to profit for the 2017 financial year on the back of significant rises in wholesale electricity prices and despite a small fall in customer numbers.