Power companies will be forced to pay rebates between $250 and $720 to thousands of customers who were paying much higher than average prices.

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

Premier Daniel Andrews says the move will return fairness to the market. Credit:Justin McManus

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.