People should pay more for power used at peak times and should be better able to take advantage of off-peak rates to reduce electricity bills, the Federal Government's energy white paper says.

The paper also suggested the rise in air conditioner use on hot days had driven up electricity prices because ensuring the power remained on in those peak periods meant heavy investment in the poles and wires network.

The white paper said that investment was behind the sharp rise in electricity prices over the last few years.

It found the carbon tax and solar feed-in tariffs also played a part but had a smaller role.

It said the price of power was now more moderate with residential electricity prices expected to fall in most places this year - because of the removal of the carbon tax - and will either be stable or decline in the next two years.

Industry Minister Ian Macfarlane said he wanted consumers to have more control over how much they were spending on power.

"We support the introduction of smart meters - that is - meters which will allow consumers not only to tell how much electricity they're consuming at any point in time, but also what it's costing them," he said.

"And with that then comes the technology which allows them to be flexible about when they used that appliance.

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"Now in the case of refrigerators, it's a non-optional appliance, you run your refrigerator all the time, but in terms of when you do your washing, when you do your ironing, when you run your pool pump, how you cycle your air conditioning, those are options which can be managed through a smart meter."

The white paper said people needed access to information about their usage pattern and used the example of being able to track it online so they could take advantage of the cheaper, or off-peak, times.

It noted some questions about fairness saying some people could not change their consumption to avoid peak times but Mr Macfarlane said most consumers would benefit from having higher tariffs at peak times and lower charges for other times.

"The opportunity, particularly for high energy households, to save money through the use of smart meters and technology, time of use charging and varying the times they use their significant consumers of electricity and their appliances, will allow households to manage their demand better and also then enable the networks to be built and maintained in a way that keeps the capital costs down," he said.

Air conditioning users subsidised in peak times: paper

Air conditioning was singled out as a fairness issue.

The white paper said large air conditioning consumers were subsidised by people who did not have air conditioning at all.

It found the real cost of using an air conditioner during peak times was $1,000 a year because that reflected the investment needed in the network to ensure the power demand was met on extremely hot days.

But the person with that air conditioner would only pay $300 more on their bill and the other $700 would be spread between all other power users.

The white paper said those cross subsidies between consumers had be removed.

Mr Macfarlane reinforced that the recent heavy investment in the power networks caused the higher power bills.

"What we have done in Australia over recent years is literally gold-plate the distribution network which consumers will end up paying for," he said.

"And if you look at the cost of electricity, whilst the costs at the power station has basically remained static for over a decade, the cost to consumers has doubled and a lot of that cost increase has come from the distribution network.

"Now, we can either manage our demand better and also manage the time we use the energy therefore affecting both the network and the generation, or we simply pay more and more for electricity.

"And if we are going to achieve the productivity growths that we're driving for and the efficiency growth that we're driving for, then we do need to use the technology.

"So in the end, even with a smart meter, a consumer can use electricity whenever they feel like it, but they will pay more at certain times and less at certain times and on the swings and roundabouts they'll pay less overall."

The white paper focused heavily on competition as a way to bring down prices and boost energy productivity and said Victoria was leading the way in consumer competition.

Last financial year 31 per cent of Victorian customers switched electricity suppliers and 28 per cent turned to another gas supplier.

The white paper also encouraged the privatisation of state energy assets, arguing private ownership was more productive.