The big three power companies could get taxpayer-funded help to underwrite their new energy generation investments unless the government steps in.
The consumer watchdog warned against giving big companies more support to increase their market dominance, and said the government's criteria for taxpayer support were too broad.
Federal Energy Minister Angus Taylor said the government is working to deliver the Australian Competition and Consumer Commission's recommendation.
"We want more independent players into that market, so we welcome the comments from the ACCC," he told reporters in Canberra on Thursday.
Mr Taylor would not rule out support for the big three power companies, but said it was important to get more players in.
"We're working through the 66 proposals now, we'll have more to say about this in the near future, but we are absolutely committed to more competition," he said.
ACCC chair Rod Sims said the government's scheme was broad on which power generators can apply for public funding.
The ACCC says the scheme's initial design was intended to prevent the big three from being involved, but the government's expressions of interest criteria is broader than that.
"We were creating an opportunity for more competition, we just hope that's picked up by not helping the big three," Mr Sims told a Senate estimates hearing.
Mr Sims remains hopeful the government will cull the major players if they are among the 66 expressions of interest.
The ACCC's plan was designed to help small and new generators to get into the market, boosting competition in a bid to drive down power prices.
Mr Sims says he had stressed to the Morrison government the importance of injecting greater competition into the energy market.
"We had concerns with the breadth of criteria calling for submissions," the ACCC chair said.
Australian Associated Press