A proposed shake-up of Western Australia's electricity market would see household bills reduced by passing the risk of investing in the market on to producers.

The Government last week released details of a review of the system, revealing electricity costs in WA are the highest in the nation.

Private power producers and retailers were briefed on the proposed changes on Thursday.

The review found a lack of competition in the market, high fuel costs and excess generation capacity to be the key drivers.

Under the current system, consumers are exposed to risk by paying power companies to hold excess capacity.

Under the current system, the Government pays power producers and retailers to hold excess capacity to prevent blackouts, rather than companies bearing the risk in entering the market if they think there is going to be enough demand.

The companies are paid capacity credits, which are worth hundreds of millions of dollars a year and can be a critical part of a generator's income.

They are also paid for energy produced and sold.

But consumers are only using a third of the electricity available and are therefore paying for power they are not using.

It is a system the review panel says does not happen anywhere else in Australia.

Review chairman Paul Breslin said it needs to be changed.

"The capacity market relies upon the independent market operator doing a forecast two years ahead," he said.

"They're forecasting excess demand and they're forecasting growth.

"This has been a strongly growing market in the past and they've forecast high levels of growth and they've gone out and procured capacity to meet those high levels.

"In fact that growth has not occurred, the market has flattened, partly because of solar on the peaks and also economic activity has declined somewhat."

Market dominance, long-term contracts 'driving power prices'

But some industry players argue the capacity market is not a major cause of high power prices.

Richard Wilson from EnerNOC, an energy intelligence software provider, said Synergy's dominance in the market and high fuel costs were the major drivers.

"The capacity market [is a] comparatively minor driver of costs in the system," he said.

"Inefficient costs are mostly explained by Synergy's structural issues in the market, some of the long term take or pay contracts that were signed many years ago that are now under water," Mr Wilson said.

He warned radical changes to the system or removal of it altogether will send companies to the wall.

"Any changes to the capacity market needs to be looked at very carefully, there are a number of private participants that have invested in good faith in this market," he said.

"They've done so on the basis that regulation and policy would be stable, if it changes arbitrarily, those investments are in danger."

Mr Breslin said any change to the system needs to be transitioned in slowly.

"People who have been asked to respond to building capacity ... they've done so, but then the rules change and we would have to make sure that we have transition mechanisms to cope with that," he said.

Synergy's market dominance is also a major aspect of the review.

It currently holds more than 65 per cent of the market, which the panel has suggested diluting by breaking the company into several smaller operators.

It is a move industry players like Mr Wilson say is key to driving down electricity prices.

"The Government has to look at the structural issues surrounding Synergy that's the major driver of costs in the Western Australian electricity system," he said.

"If it doesn't address those issues, then very little reform can occur."

The panel will now take submissions from industry on its paper and plans to hand its final recommendations to the energy minister by the end of October.