Report says some power bills are subsidising others

THE Grattan Institute claims urgent electricity reforms are needed to prevent Australians paying too much for power.

The organisation's Fair Price for Power report revealed a different way of charging customers could have saved network businesses nearly $8 billion in reduced investment over five years.

Grattan Institute energy program director Tony Wood said on Monday the average Australian power bill had increased by 70% in the past five years.

"Some of that burden is unfair and it is falling especially heavily on some consumers whose bills are subsidising others," he said.

"We have to find a better way."

The report recommends a change to the way consumers pay for the network that carries electricity from generators to homes so that it better reflects the cost of running the network.

Mr Wood said instead of charging a household based on its total energy use, the 43% of the consumer bill that goes to fund the network should be based on the load the household puts on the network when it is drawing down most power.

"Calculating bills based on a household's maximum load far better reflects the real cost of running the network," he said.

"If we can get this cost down, we can get consumer prices down."

The report proposes a second tariff for households in geographic areas where the network is under greatest strain and where expensive new infrastructure will have to be built unless the strain is relieved.