Green groups are furious the State Goverment has abandoned a Labor plan to close two units at the Hazelwood power station.
Energy Minister Michael O'Brien said the previous government's proposal to pay for the early closure of the two units was uncosted and unfunded.
Hazelwood is one of the dirtiest power stations in Australia and produces 23 per cent of Victoria's electricity needs.
Mr O'Brien took aim at the former Labor Government, arguing Victorian families were already suffering from their "failed'' smart meter and renewable energy policies.
"The former Labor Government had no plan to provide an operational baseload replacement for the electricity generation provided by the two units of Hazelwood,'' he said.
"Without an operational replacement for the electricity generation from these units, the power would likely have come from electricity imported from other states and generated from black coal -a poor outcome for Victorians and the environment.''
Friends of the Earth spokesman Cam Walker said the decision proved the Coalition Government had no plan on climate change.
"The Coalition has now been in government for almost half a year. Yet they have still not released a climate change policy, and the community is now being told that the 20 per cent greenhouse emissions reduction target that the Coalition voted to support while in opposition is now 'aspirational','' he said.
"It is hard to believe that with all we know of climate science, that a government in 2011 is prepared to walk away from meaningful action on climate change.''
Latrobe Valley Sustainability group spokesman Dan Caffrey said the group was very concerned another power plant would be built in the valley.
"Our view with regards to shutting down two units at Hazelwood was that it was premature and would unnecessarily cost jobs,'' he said.
"There was nothing to replace it and we would have copped the brunt of the blame for any possible shortages.
"We are more concerned about another plant being built here and it becomes locked in for another 30 or 40 years at least."