Grattan says that in Victoria the average mark-up for retailers on top of generation and distribution costs is about 15 per cent, which is almost three times higher than average across retailing in Australia and three times the profit margin of electricity retailers in the UK.

"Although retailers fulfil an important role in delivering electricity to consumers, it is hard to justify a 15 per cent mark-up when other forms of retail business earn substantially less," the report says.

Some consumers who do not shop around and are on so-called "standing offers" are paying margins as high as 43 per cent. By contrast in Victoria the cost of all green schemes and the cost of installing smart meters combined is about 6 per cent.

It is hard to argue this has resulted in improved services, Grattan says.

The main change in retailing in the last decade has been the spread of discounts for people who pay on time or receive electronic bills. But the discounts only apply to new customers, bare little relation to the costs savings and usually cease without notice after an introductory period.

Households currently served by the the big three incumbents – AGL, Energy Australia and Origin – could theoretically save between $94 and $164 a year by shopping around but some people still don't know this is possible, and even those who are usually give up in despair. Half of all consumers haven't changed retailers in the last five years.

Facing similar problems Britain and Canada have both moved to partially re-regulate their electricity retail sector by mandating a basic tariff structure electricity sellers must offer to all customers.The Grattan report argues that Australia should not rush to follow this example because it could discourage important innovation such as bills that reward customers for using batteries and solar power.


But it argues that the Australian Consumer and Competition Commission should urgently inquire into the electricity retail market just as it did in the gas market. It says that electricity retailers should have to give clearer information about actual costs. Currently they offer discounts to attract customers but this might only cover a small portion of the bill and cease after a short time. The report also urges measures to help disadvantaged groups who typically are the least savvy get the bets deal.

Prime Minister Malcolm Turnbull said through a spokesperson that Australian households and businesses were paying too much for their electricity. "We are cleaning up Labor's mess by ensuring that electricity is affordable and reliable for households and business."