'Smells like death': fire-hit town stripped of water

Residents forced to flee out-of-control bushfires are waiting to count their losses as the blazes cut water in one fire-ravaged town.

An uncontrolled bushfire in Victoria's Otway Ranges, 200km southwest of Melbourne, has claimed at least three homes and threatens to raze more following searing temperatures and erratic winds.

The blaze is travelling in a northeasterly direction towards the communities of Gellibrand and Kawarren.

Residents in towns near the Carlisle River fire were told to take shelter immediately early on Wednesday morning, with authorities warning it was too late to leave.

Homes in Gellibrand have been stripped of clean water after the inferno damaged a local treatment plant.

Tap-water access was restricted and the remaining water was believed to be unsafe to drink.

Authorities will be working to restore water access and set up alternative supplies once it is safe to return to the area.

Gellibrand resident Rob Murphy told AAP he decided to evacuate to Colac at the last moment on Monday.

"I had an agreement with my partner that if the (Country Fire Authority) captain came and told me to leave, I would go," he said.

"That's what happened."

Mr Murphy described the scene at the time as tense while locals weighed up defending their properties or following warnings to evacuate.

He said only a handful of Gellibrand locals ended up staying, but he estimated upwards of 50 held tight in surrounding towns.

A friend who remained in the small town, normally home to a few hundred people, reported back that it "smelled like death" after the blaze claimed local wildlife.

He woke to find a dead sheep slumped at his front door and a farm littered with dead kangaroos, koalas and cattle, Mr Murphy said.

The Carlisle River fire has scorched at least 10,500 hectares of land, having doubled in size since breaching containment lines on Saturday afternoon.

Warnings to shelter immediately were active for Gellibrand, Barongarook, Barongarook West, Kawarren, Carlisle River and Gerangamete.

Evacuation warnings were in place for several Otways communities including Lavers Hill, Beech Forest and surrounding towns.

The Carlisle River fire was one of six major fires burning across the state on Wednesday, including uncontrolled blazes near Walwa in the northeast and Dargo-Wonnangatta in the east.

Authorities have been on high alert as the state's worst heatwave in nearly two decades reached its peak on Tuesday.

The Mallee towns of Walpeup and Hopetoun recorded Victoria's all-time hottest temperatures at 48.9C.

Health authorities are warning the most dangerous days may still be ahead as communities grapple with consecutive 40C days.

More than 25,000 households remained without power early on Wednesday morning as distributors warned there could be delays in getting services up and running.

Relief centres are open at multiple locations, while more than 430,000ha have been burnt across the state, nearing the estimated 450,000ha scorched during the Black Saturday fires of 2009.

Residents have claimed more than $200 million in losses from 3123 claims since January 7, the Insurance Council of Australia said.

Those figures include property, motor, commercial and business interruption claims, with nearly a third of property losses estimated to be total losses.