Prime Minister Julia Gillard has been accused of hypocrisy and compared to a cane toad after she told the states to lower electricity prices, or else.

Speaking at the Energy Policy Institute in Sydney on Tuesday afternoon, Ms Gillard said skyrocketing power prices were hurting households and businesses.

"I want to say very clearly, the last four years' price rises cannot continue," she said.

"[There have been] fifty per cent price increases in many states over four years linked to demonstrable inefficiencies in resource allocation in the market; or in this state, New South Wales, nearly 70 per cent increases.

"Some states, like New South Wales and Queensland, are doing very well out of this financially and their revenue from some electricity assets is growing much faster than in the private sector."

She challenged the states to come up with ways of reducing power prices, and says if the premiers won't act, she will do it for them.

"We won't lightly use the big stick of regulation, of stronger powers for the Energy Regulator and the ACCC, but it's a stick we hold and which we'll use if required," she said.

Ms Gillard has already written to state leaders, asking them to come up with solutions by the end of the year.

'Deflecting criticism'

The Victorian Government was quick to respond, saying it gets no revenue because the electricity market has been privatised.

Victorian Premier Ted Baillieu says Ms Gillard has "seriously got to be kidding".

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But New South Wales Energy Minister Chris Hartcher is not seeing the funny side.

He says Ms Gillard was wrong to accuse the state governments.

"What has happened in New South Wales is prices have risen. They've risen considerably and they're going to rise even more unfortunately because of the carbon tax," he said.

"And that's what this speech and everything is all about; it's to try and deflect criticism away from the carbon tax."

The New South Wales Government's power assets give $700 million a year to its budget bottom line.

"If the Prime Minister wants the dividends reduced then she can identify the hospitals and schools which should be cut," Mr Hartcher said.

New South Wales and South Australia have both seen their average household power soar by around $1,000 over the last four years. And other states are not far behind.

The carbon tax will add $170 to that in New South Wales, and less in South Australia.

Those details have sparked the Opposition Leader into action.

"This is a Prime Minister who is now trying to blame the states for electricity price rises that are largely caused by her carbon tax," Mr Abbott said.

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'Gold medal hypocrisy'

Ms Gillard disagrees.

"Australia needed a carbon price. Australia did not need price increases of fifty per cent or more for households over the last four years," she said.

But the Coalition says the Federal Government has been setting national electricity prices for years, not state governments.

"Frankly it is gold medal hypocrisy for the PM to blame the states when every one of these increases goes through a federal regulator," Mr Abbott said.

West Australian Energy Minister Peter Collier also says Ms Gillard's speech is nothing more than a distraction attempt.

"I mean with all due respect, the Prime Minister has the credibility of a cane toad," he said.

"Cane toads have very little credibility in the West Australian public's eyes."

Federal Opposition energy spokesman Ian MacFarlane admits state governments have using price rises to raise revenue, but says the Prime Minister should have acted more quickly.

"The reality is she's had this power, she's known the problem existed but she chose to do nothing about it," he said.

"As usual with Labor they're five years too late. The Prime Minister has been aware of the problem, but through her incompetence has failed to do anything about it."