Tasmania's Premier has indicated the sale of power retailer Aurora Energy has collapsed because bids for the state-owned company were not high enough.

The Government was hoping two interstate retailers would buy Aurora Energy's customer list to give Tasmanians a choice of power provider.

Energy Minister Bryan Green told Parliament yesterday there has been "a change of circumstance".

This morning he defended the Government's decision to reject a key expert panel recommendation to strip Hydro of its ability to sell the power it generates.

Industry insiders say the move has undermined the Government's bid to sell its Aurora.

Mr Green said that the Government acted on Treasury advice, which said the expert panel's proposal was too risky.

"That risk, in the end, would culminate in no other recourse other than to sell off the generator and this side of the House certainly is not and never will be committed to selling the Hydro," Mr Green said.

Premier Lara Giddings used Question Time to defend her Government's handling of the state-owned asset.

"What we have done is put an asset out into the market, we've tested the market, the market...has not been able to proceed us with what we believe will be a fair and reasonable price, and therefore we've withdrawn the asset," she said.