In an unprecedented development, power companies have been forced to buy emergency supplies of water on the internet after the drought left them short of what they need to run major generators in the Latrobe Valley.
The move has prompted fears about the long-term viability of the region's power stations, which provide 85 per cent of Victoria's electricity.
And in a separate development, the state's newest power station, at Laverton North, has been ordered to shut down indefinitely on weekdays because of a health scare at a neighbouring factory.
If the station was forced to remain idle during daylight hours next summer, Victorians would face a significantly increased risk of blackouts at peak times and higher power prices.
The water crisis has hit two major power stations in the Latrobe Valley, Yallourn and Loy Yang B. The stations' owners have confirmed to The Age that they have recently resorted to buying extra water on an internet auction site, Watermove, to tide them over until the end of the financial year.
The crisis has prompted the owner of another station, Loy Yang A, which has so far escaped the need for emergency water supplies, to express concern about the impact of the drought on future electricity generation.
"A range of contingency measures are being considered," said Loy Yang A chief executive Ian Nethercote. "No significant rainfall in the next few months is likely to place further pressure on the availability of allocated water reserves for brown coal power stations."
Water is an essential part of the electricity generation process. Power stations in the Latrobe Valley initially burn coal and the heat from that process is used to boil water. The steam then drives turbines to generate electricity.
TRUenergy, which runs Yallourn, said the situation was "unforeseen", and it was the first time it had topped up its annual water supply.
Power stations buy an annual bulk entitlement from water authorities, administered by the Department of Sustainability and Environment. A portion of that comes from Southern Rural Water's Blue Rock Dam and another portion comes from the region's rivers.
But inflows have been so low during the drought that they have not been able to secure their normal allocations from Gippsland's rivers. Yallourn alone has an annual water entitlement of 36,500 million litres - equal to about 7 per cent of the average annual consumption in metropolitan Melbourne.
State Energy Minister Peter Batchelor said the Government was consulting closely with the power generators to review theirneeds.
He said senior bureaucrats had met the Latrobe Valley generators' chief executives in recent weeks to discuss the problem. There was "no immediate concern" for power generators.
In a potentially more pressing development, the risk of blackouts next summer could be increased after Victoria's planning tribunal restricted the operating hours of Snowy Hydro's power station in Laverton North due to a health scare at a neighbouring factory.
Workers at building material company Metroll - directly opposite Snowy Hydro's $150 million power plant - had complained of intense headaches and nausea since the gas-fired "peaking station" began operation in December.
The 320-megawatt station was commissioned to augment supply from the Snowy hydro-electricity scheme, particularly during peak summer periods and emergencies.
Victorian Civil and Administrative Tribunal deputy-presidentHelen Gibson yesterday imposed an interim enforcement orderpreventing the power station from operating between 8am and 5pmfrom Monday to Friday.
Ms Gibson said the order would give Snowy Hydro and engineeringgroup Siemens the chance to rectify any design faults before thematter is heard again before VCAT.
A recent investigation by Wyndham City Council found "the operation of the gas-fuelled turbines ... adversely affects the amenity of the area by way of low-frequency noise and vibration".
National Electricity Market Management Company spokesman PaulBird said a review of Victoria's electricity network would belaunched to ensure it could meet peak demand next summer.
Mr Bird said the VCAT decision was unlikely to affect winter supplies because peak consumption periods usually occurred after5pm, when the station is still allowed to operate.
Snowy Hydro spokesman Paul Johnson said the company would consider its legal options, but would observe the interim order.
The power station's licence with the Environment ProtectionAuthority allows it to to be used only during peak periods.
But Metroll manager Ken Broadfoot said the plant had run almost continuously since Christmas. He said it had directly contributed to adverse health effects experienced by many of the company's 70employees.
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