Hundreds of workers at one of Australia's largest power plants will have their pay drastically slashed by up to 30 per cent, after energy giant AGL won a bid to abolish a long-standing agreement.

The Fair Work Commission on Thursday agreed to tear up the existing pay and conditions for all employees working at the massive Loy Yang power plant in Victoria's Latrobe Valley. The plant supplies about 30 per cent of Victoria's power and is an important part of the national energy system.

More than 570 workers there now face deep cuts to their take-home pay and superannuation, as they will now revert to less favourable minimum rates of the power industry, known as the award.

Workers who spoke to Fairfax Media said they were "flabbergasted" at the decision, which would be a huge blow to the plant's ageing workforce.