Labor is celebrating the treasurer and energy minister being "humiliated" into watering down the extraordinary divestiture powers after copping flack from coalition colleagues.

"This ridiculous policy, this Venezuelan-style intervention, this intervention in the economy which would chill investment, has collapsed under its own weight," Shadow Treasurer Chris Bowen said in Canberra on Tuesday.

"Abbott-Turnbull-Morrison energy policy 27.0 has been destroyed by their own party.

"They are pathologically incapable of delivering the country an energy policy."

The government is revising key components of its plan after objections from more than 20 backbenchers during a party room meeting on Monday night.

The divestiture powers will remain in the legislation.

However, rather than giving Treasurer Josh Frydenberg the final say on breaking up the energy giants, he will have to apply to the courts which will have the final say.

Energy and business industry groups have spoken out against the original divestiture powers, warning they could blur the lines between parliament and the judiciary, and fall foul of the constitution.

Former prime minister Malcolm Turnbull told reporters in Sydney any divestment powers must have proper safeguards and occur only in circumstances where the Australian Competition and Consumer Commission's efforts in protecting electricity customers had been unsuccessful.

"The devil will be in the detail," he said on Tuesday.

"But with great respect that is not a substitute for the national energy guarantee.

"Ensuring a competitive market and the protection of consumers is vital, but you also have to have the certainty of integrated climate and energy policy so you get the investment."

Australian Associated Press