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December 02 2012, 4:33PM

Australian households could save up to $250 a year on their power bills if Prime Minister Julia Gillard can convince the states to support her proposed changes to the electricity sector.

Ms Gillard on Sunday announced she'd be pitching a range of measures to state premiers at next week's Council of Australian Governments (COAG) in Canberra.

The states will be asked to bolster competition in their electricity markets and consider introducing smart meters and cost-reflective pricing so consumers can better manage their energy usage.

But Ms Gillard said asset sell-offs won't be on the agenda as the plan tackles the way Australia's energy system works, not who owns it.

"We can make a difference," Ms Gillard told Channel Ten on Sunday.

"I will be taking (to COAG)... a plan to make sure that families pay $250 less per year for electricity than they would if we just let the current system run."

The coalition was quick to condemn the announcement a "stunt" that ignored the impact of the carbon tax on power prices.

But consumer groups, some who claim power prices have jumped 50 per cent in just four years, welcomed some elements of the proposals.

Ms Gillard said the plan would tackle the drivers of high energy prices such as overinvestment in poles and wires - or "gold plating" - of the electricity network.

A new "consumer challenge panel", modelled on a UK system, would see independent experts scrutinising new proposals for spending on electricity works by energy companies.

The states would also have to meet new national guidelines to avoid gold plating in their assets, while a consumer advocacy centre would help campaign for protecting customers' interests.

To ensure compliance, the Australian Energy Regulator will be given more muscle through $23 million in additional funding over four years.

Ms Gillard will call on state energy ministers to introduce cost-reflective pricing and smart meters so consumers can avoid the occasional peak times that cause a staggering 25 per cent of electricity bill costs.

Price signalling and smart meters were flagged as options for helping change consumer energy usage in the federal government's energy white paper, released last month.

The Productivity Commission claims that allowing households to switch off during peak times could save consumers between $100 and $250 per year.

Under Ms Gillard's plan, power-hungry businesses that moderate their energy usage during these peak periods would also be rewarded.

Consumer-advocacy group One Big Switch said the plan was a "valuable start" to making the energy market work in the interests of consumers, but warned it might be a while before savings are made.

National welfare agency The Brotherhood of St Laurence welcomed efforts to ease cost pressures on poorer households, while energy advisory group Smart Grid Australia urged state leaders to back the measures.

Opposition climate change spokesman Greg Hunt branded the plan a "stunt", adding the carbon tax was "overwhelmingly" responsible for causing Australia's biggest energy price hike in history.

Opposition energy spokesman Ian Macfarlane criticised Ms Gillard's decision to announce the plan ahead of the COAG meeting on Friday.

"Instead of waiting to sit down with them and discuss in full detail the path to energy market reform that will lower electricity prices, Julia Gillard again prefers to let political games triumph," he said in a statement.

By Nick Perry