There has been a recommendation the Government increase electricity prices by 23 per cent, adding more than $350 to the average household bill, in order to meet the true cost of its production.

A draft report by the Economic Regulation Authority has found Synergy would need to increase the average household bill by $353 next financial year to achieve cost reflective pricing.

The ERA says residential tariffs would need to rise by 23 per cent on July 1, of which 8.4 per cent would be attributed to the carbon tax.

The State Government has already flagged an increase of five per cent, exclusive of the carbon tax, in last year's budget.

The ERA's Lyndon Rowe says there has already been a 57 per cent increase in tariffs since 2009 but more is needed to reach the true cost of producing power.

"Somebody is paying for this," he said.

"At the moment, there's a significant subsidy, I think in the order of $350 to $400 million, that the Government pays Synergy because we don't have cost reflective tariffs and that's paid for by WA taxpayers."

"Talking about a 23 per cent rise in electricity is not a welcome thing but I guess if there is a positive out of this, it is our view that after we get over this hump, in fact, the pressure from other increases is diminishing."

The Government will have the final say on any price increases.

The Opposition's Bill Johnston says it needs to remember that households have already been hit hard.

"I think the Government needs to demonstrate it's got families in mind, needs to understand the problems that people in Western Australia have had because of the savage increases they've had to date," he said.

Water costs

A new report also reveals Perth consumers pay the second highest water bills of any capital city.

A National Water Commission report says residents paid, on average, $1,050 annual water rates last financial year.

The state's Water Corporation is the most lucrative water utility nation-wide, generating $551 million profit, of which the Government takes a more than $400 million dividend.

The Premier Colin Barnett has defended the water bills.

"Western Australia in the bigger picture has got not much choice," he said.

"We are getting such a poor deal out of financial relations with Canberra that we do have to generate income from services provided for in Western Australia, including water services.

"That's what we use to help run schools and hospitals."

The Opposition's Fran Logan says residents should not be paying so much with the report also revealing the utility has the second lowest operating cost per property.

"[We're] paying more than anywhere else in the country apart from Darwin, we're also one of the highest water consumers but the two still don't marry up because operating costs for Water Corp have dropped and the profits are absolutely huge," he said.

"Are we being slugged with water bills or are we paying a water tax?"

Mr Logan said any price hikes should be ruled out.

"They could actually take a lower dividend and give some benefit back to water consumers in Western Australia by either having no increases or reducing water prices."

Mr Barnett says prices could come down as more water sources become available.

"I think we can hold prices down now because there have been some big increases, everyone's aware of that, but that was done in an environment where there was a real doubt about future water supplies for the state," he said.