What needs to be done to bring down electricity prices?

Electricity prices have been rising for some time now, but is there anything that can be done to bring them down for consumers throughout Australia?

A new report from the Grattan Institute seems to think so, as the group explained that charging customers differently could be just what the market needs.

So what's the plan?

Tony Wood, energy program director at the Grattan Institute, noted that during the five years to 2013, the average household power bill has increased by 70 per cent.

He argued that some people's bills are subsidising others, which is why the situation needs to be rectified sooner rather than later.

The Fair Pricing for Power report identified that network businesses could have saved themselves as much as $8 billion in reduced investment over a five-year period, with the savings passed onto customers.

The Grattan Institute proposes that cost changes better reflect how much it takes to run a network, which isn't the case at the moment.

It believes that households should be charged based on their total energy usage. This would mean the 43 per cent of their bill that goes towards funding the network is based on the load the household places on the network when its power usage has peaked.

Meanwhile, a second tariff would be made available in areas where the network faces the greatest pressure.

This will help eliminate the need for expensive new infrastructure to be built in order to relieve the strain, which will only increase the cost of electricity bills.

Mr Wood explained: "Calculating bills based on a household's maximum load far better reflects the real cost of running the network. If we can get this cost down, we can get consumer prices down."

Levelling out the playing field

The Grattan Institute explained how these changes would mean increased electricity prices for consumers who use more energy at peak times, while reducing them for others.

It doesn't expect the effects to be seen straight away. This is something that would take time to filter through to consumers' pockets - but it'll be worth it in the long run.

Mr Walker urged the government to take a look at these recommendations and take whatever steps are necessary to put them into practice.

"Australians are tired of paying too much for power," he emphasised, adding that tackling the unnecessary construction of infrastructure will be one of the most effective ways of tackling the issue.

Posted by Liam Tunney.