PENSIONERS, singles and empty-nesters are in for a shock with fixed electricity fees set to surge.

After promising cost-of-living relief, the Newman Government will reform electricity tariffs to ensure prices fully reflect production costs.

In a radical departure from the current system, households face a massive spike in fixed electricity costs - before even turning on a switch.

It comes in exchange for a lower variable cents-per-kilowatt rate on the common household tariff.

Under the current capped price, households pay 23 cents per kilowatt with fixed charges of about $95 annually.

Modelling based on current power costs shows the c/kWh would fall to 20 cents but the fixed charge will increase to $287 annually.

A family using 10,000 kWh would save about $100 a year. However, a small household using 2000 kWh would pay in excess of $130 more without using any extra electricity.

The fixed component of future bills will represent the average price of distributing electricity to every household, the so-called "poles and wires' businesses which make up about half of total electricity costs.

Bigger households, who are effectively subsidising other users under the current system, would get some relief from the reform.

However, smaller households with lower levels of consumption will feel the effect.

Energy Minister Mark McArdle said the Government had chosen a three-year timetable to "even out" the excessive impact of cost-reflective tariffs.

"Left alone that would be an impact that would be significant," he said.

"But we are not going to leave it alone, we are going to deal with the other factors as well."

The Government has set up two committees in a bid to find significant efficiencies in its distribution businesses.

Unions fear that this will lead to job losses and further cost-cutting that will in turn affect the reliability of electricity.

Queensland Consumers Association's Ian Jarratt warned a large fixed fee would discourage households from being more efficient.

"If most of your electricity bill is fixed, and not dependent on how much is being used, the incentive to save is reduced," he said.

However, Energy Retailers Association chief Cameron O'Reilly said cost-reflective pricing was an important step towards establishing a competitive market.

Mr O'Reilly said governments needed to offer greater subsidies for vulnerable households and encourage the installation of smart meters with time-of-use tariffs so people could work out how they could best cut power use in their own homes.

"From our point of view, I think that is the right approach," he said.

"You do need to use a price signal to encourage change but this is an industry that has operated the same way for a very long period of time."

Originally published as Battlers to pay more in electricity review