The proposed 130MW power station would be an upgrade of Victoria's Kiewa Valley hydro-electricity scheme and there would be no need to build a new dam, state energy minister Theo Theophanous said yesterday.

Southern Hydro's proposed Bogong power station would generate enough electricity to power 18,000 homes.

Theophanous said the company would soon to begin the planning approval process, which would include an environmental impact study and community consultation.

If approval is granted the power station will require a 6km tunnel to carry water already used in the McKay power station. The plant would be built at the company's Junction dam below Bogong village.

Southern Hydro already produces 650MW of hydro power and 91MW of wind power.

Formed in 1995 from the disaggregation of Victoria's electricity industry, Southern Hydro accounts for 6% of the state's total electric generating capacity.

In 2003 it was purchased by New Zealand's state-owned Meridian Energy.