Households on the east coast will pay as much as $430 more for electricity by the end of 2019 owing to uncompetitive gas prices, a new McKell Institute report has warned.

The report commissioned by the Australian Workers’ Union says the federal government’s “piecemeal” approach to inflated wholesale prices does not go far enough to restrain prices.

As a result it estimates that households in New South Wales will pay $434 more for electricity than if gas prices were at a level the competition regulator has said is reasonable, while those in Queensland will pay $313 more and Victoria $254.

The figures are based on the forecast price and consumption trends, including the government’s current gas policy settings, without a further significant reduction in wholesale prices.

In 2017 households already paid up to $175 more for electricity than they would have if wholesale gas prices had been at levels the Australian Competition and Consumer Commission said would be reasonable.

In September the ACCC found that wholesale gas prices should have been between $6.30 and $7.80 per gigajoule but were an average of more than $9/GJ; and many industrial users were being offered $16-$22/GJ.

The McKell Institute said “there is a problem with Australia’s gas market”, arguing it was “ironic that Australia, as the eminent world leader in gas exports, is subject to the world’s highest gas prices”.

It blamed state and federal governments on both sides for enabling “major gas producers to develop Australia’s natural gas fields without properly ensuring their committed export contracts would not drain supply out of the domestic market”.

The AWU, which represents workers in energy-intensive industries such as steel and aluminium production, has long argued for gas reservation and will renew the push this week with the release of a detailed policy.

In 2017 the Turnbull government warned the gas industry that it could reserve a quota of gas for domestic consumption before settling on a policy of creating a trigger for export controls when supply was constrained.

In September the government did a deal with major gas companies to increase domestic supply, avoiding the need to pull the trigger.

In December the ACCC found prices offered to large industrial users had falled from a peak of $16/GJ to within the range of $8-$12/GJ.

The ACCC chairman, Rod Sims, said that despite increased domestic supply and “short-term improvements … the market is still not operating as well as it could”.

“Prices remain higher than they would be in a well-functioning and competitive market,” he said.

Malcolm Turnbull heralded the fact wholesale gas prices had already fallen, owing to what he called “pretty heavy-handed” intervention in the market.

But the McKell Institute said the changes “have not led to major contractions in gas prices”.

The export control trigger “does not go far enough to ensure supply over the long term, or put downward pressure on prices”. It said the trigger and agreement with gas companies were short-term fixes.

“Without significant government action, there is no guarantee that prices could fall to rates the ACCC have suggested are achievable.”

The McKell Institute noted that the regulatory impact statement for the gas trigger, written by the department of industry, found that a blanket gas reservation policy would “provide the most security to the domestic energy market”.

“It concluded that it would have substantial short- to medium-term net benefits for the economy, but come at a high cost to all LNG exporters,” the report said. “Of primary concern was that a blanket policy would discriminate against those LNG producers not liable for the domestic shortfall.”