PRIME Minister Julia Gillard says Australians are paying more than they should for electricity, accusing the states of boosting government offers at the expense of families.
In describing power bills as the "new petrol prices", Ms Gillard said those least equipped to deal with soaring electricity costs - pensioners and low income families - were hurting while state governments reaped the rewards.
She said Queensland and New South Wales, in particular, were "doing very well" out of increased revenue from electricity assets.
In a speech to the Energy Policy Institute of Australia, Ms Gillard said it was clear the states were in a position to "do more to cut future price rises".
She threatened, if needed, to use the "big stick" of regulation and increased watchdog powers to get escalating power prices under control.
"My preference is to work co-operatively with the states through COAG to deliver a better outcome for consumers," she said.
"We won't lightly use the big stick of regulation, or stronger powers for the Energy Regulator and the ACCC.
"But it's a stick we hold and which we'll use if required. One way or another, we're going to get this done.
"She revealed she had written to each of the states indicating she wanted "solutions on the table" when the Council of Australian Governments next meets in September.
Ms Gillard said she left the last meeting of COAG two weeks ago - where the issue of electricity prices was prominent - convinced action could be taken before the end of the year.
The Prime Minister also addressed the elephant in the room - the carbon tax - early in her lengthy address.Australia needed the forecast 10% increase in retail electricity prices brought on by the carbon tax, she said, with the compensation being offered ensuring most Australians were no worse off.She contrasted this with the 48% jump in power prices over the past four years, for which consumers received no compensation.
"This is the difference: Australia needed a carbon price," she said.
"Australia did not need prices increases of 50% or more for households over the last four years - and Australians can't afford the same kinds of increases over the next four years.
"While conceding the factors driving the increases were "complex", she said it was unsustainable both economically and socially for prices to continue increasing at the current rate.
She said improving efficiencies in the energy supply market and removing a "clear regulatory incentive to over invest in infrastructure" would help bring down prices.
Using innovation to give people more control over what they paid for power was also essential, she said.
"People should be able to use what they want, when they want it and cut out expensive services they don't need," she said.
The Federal Government's Energy White Paper is expected to be released later this year.
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