South Australian electricity bills should fall by about $197 for an average household over the financial year from July, the Australian Energy Regulator (AER) says.

A draft ruling will let SA Power Networks charge customers a total of $3.2 billion over the next five years for delivering power on its distribution network.

The company had wanted to recover 32 per cent more than that.

The regulator said demand for electricity had fallen and put less strain on the distribution network, requiring less investment to provide a reliable supply.

AER board member Jim Cox said an average household could expect its annual bill to fall by 9.8 per cent from 2015-16.

"The AER has developed new guidelines and techniques, including improved benchmarking, to better forecast how much network businesses operating prudently and efficiently should need to spend," he said.

"Any costs above efficient levels will need to be funded by the network owners, not customers."

Electricity demand expected to remain 'flat'

Mr Cox said electricity demand had fallen and was expected to remain reasonably flat at least until the end of the decade.

"The perceptions of risk, which increased during the global financial crisis when the AER made its last determination, are now decreasing," he said.

"This means that the lower cost of capital for debt and equity translate into lower financing costs necessary to attract efficient investment."

Mr Cox said SA Power Networks wanted to cover the costs for more bushfire risk management and other improvements but the regulator had not accepted those spending proposals.

"SA Power Networks has not adequately justified the additional expenditure. We understand some of proposed measures could be funded from sources other than electricity customers," he said.

SA Government had urged savings be identified

The South Australian Government welcomed the energy regulator's determination.

Tom Koutsantonis said the Government had urged the AER to find savings that could lower power bills.

Energy Minister Tom Koutsantonis said the Government had urged the regulator to find any opportunities to achieve lower electricity prices.

"We welcome this draft decision by the national regulator, which recognises the need to provide power bill relief to South Australian households, while providing SA Power Networks with the required resources to ensure reliable power supply," he said.

The Minister said he was now urging power retailers to pass on the savings to customers.

He reminded South Australians they could use the website www.energymadeeasy.gov.au to help them shop around for the best deal for their household.

Mr Koutsantonis welcomed the AER's support for replacement of the Kangaroo Island undersea cable to ensure the island's residents got a reliable power supply in the longer term.

Business sector welcomes price ruling

Business SA also said the proposed decline in power bills was much-needed.

CEO Nigel McBride said businesses had identified it as a priority.

"Our recent survey of member businesses found 87 per cent want reduced electricity prices as their highest priority over increased spending on measures to improve reliability, customer service, bushfire mitigation and road safety," he said.

"It will result in significant price relief for business, particularly in sectors such as manufacturing and irrigated agriculture which are key export drivers.

"Savings on electricity prices will not only accrue to business but will also be passed back to South Australian households and this will provide a welcome boost to the local economy, particularly the retail sector".

The SA Opposition said it was pleased there was finally some good news for South Australian households and small businesses.

But frontbencher Dan van Holst Pellekaan said it was not yet clear what benefits they could expect beyond next financial year.

"While it will determine prices for 2015-16, the final decision regarding price rises for the following four years won't be made until October," he said.

SA Power Networks official Paul Roberts said the ruling would have an impact on some additional programs the company had hoped to pursue.

"It has not approved a number of initiatives which we actually put forward because of detailed consultation with customers," he said.

"The regulator has not approved additional funding to improve vegetation management outcomes.

"It also has not approved some areas of bushfire [risk] management and improvement of the network to respond to extreme weather.

"Those are things that we will put submissions back to the regulator on because they were certainly supported by customers."

The AER's draft decision on power prices is now open for comment from consumers and other energy stakeholders.

Written submissions must be received by July 3, ahead of its final determination by the end of October.