Consumers who use lots of power at peak times could soon be forced to pay more for electricity, as part of the Federal Government's plan to cut energy consumption and create a fairer billing system.
Energy Minister Martin Ferguson say there is no quick fix to counter the energy price rises of recent years, but he is challenging the states to introduce reforms which might ease some of the pain.
Today he releases the Government's long-awaited energy white paper which calls for an overhaul of electricity pricing and for innovations to allow customers to better manage their energy use.
"Pricing structures are resulting in inefficient peak demand," Mr Ferguson will say in a speech to be delivered later today.
"This means that additional capacity is required to be built that might only be used for one per cent of the year." He says demand-based pricing and smart meters will help overcome that problem, and allow consumers to monitor their energy use more closely.
Mr Ferguson concedes that many of the ideas included in the white paper will need the cooperation of the states, and he is urging them to take a bipartisan approach to the issue.
"This will require making some hard decisions and sometimes overcoming populism for what is in the long-term interests of consumers," Mr Ferguson will say.
The policy paper paves the way for tough negotiations between the Commonwealth and the states - the first is set for next month's Council of Australian Governments (COAG) meeting.
Mr Ferguson will unveil the white paper in Victoria - a state he says is a model for energy sector reform.
His Opposition counterpart Ian Macfarlane has welcomed the move.
"Victoria now boasts the lowest transmission charges in Australia because there is a privatisation of the network," he said.
"So we need to encourage the states but you won't get the states to do what needs to be done by politicising the issue as Julia Gillard has done or by waving a big stick at them." But any change will require political courage and Queensland is going to need some convincing.
The State Government is adamant its electricity assets would not be sold without a mandate from the electorate.
Queensland's Energy Minister Mark McArdle is sticking by the state's policy of ensuring far-flung electricity consumers do not pay more than those closer to Brisbane.
"We are quite happy to work in conjunction with the Federal Government to try and resolve the issues but it must be a true partnership," he said.
"One of the issues that we are facing in this state is the very high cost of green schemes that are passed through to the consumers.
"Privatisation is simply not an issue on our agenda, we don't believe it is the way to go and we are yet to be convinced of an argument that has been properly mounted to show us that privatisation is the way to go." Industry concerns The white paper will say that electricity pricing needs to be overhauled to stop inefficient investment in infrastructure which is only used during rare peak demand times.
Smart meters, which are being rolled out in Victoria, may be part of that overhaul.
Energy Networks Association chief executive Malcolm Brown says the technology allows customers to monitor prices so they can adjust their electricity use accordingly.
"If customers were aware of the full cost of using that power at that time, they would probably use less energy at that time," he said.
The white paper envisages gas-fired electricity generation as a growing part of the energy mix but gas prices are expected to increase as exports rise and producers are worried that big industrial users will pressure the Government to keep prices down.
The Energy Minister says the gas market should not be interfered with - a sentiment the Australian Petroleum Production and Exploration Association (APPEA) chief executive David Byers welcomes.
"We shouldn't be interfering with those basic issues of supply and demand," Mr Byers said.
"That is the way in which we create effective and efficient marketplaces in commodities such as iron ore and coal and wheat and really gas is no different in that respect."