Competition in the electricity market has failed consumers, with power bills almost doubling over the past decade.
That failure is worst in Victoria, a new report from the Grattan Institute finds.
Despite that state having the most electricity retailers and the longest history of deregulation, the analysis estimates Victorian consumers would save $250 million a year if power profit margins were brought into line with other businesses.
It finds the profit margin in Victoria is about 13 per cent - more than double the 5-6 per cent margin regulators traditionally consider fair when setting power prices.
"High gas prices, the shutdown of older coal-fired generators and the shift to renewables are having an impact," Grattan Institute energy experts Tony Wood and David Blowers write in the report.
"But the steep price rise in Victoria is unjustified because, unlike NSW and Queensland, it has not had to cover major new investment in poles and wires."
The report also says deregulation and competition in the electricity market across the country has failed to deliver the promised innovation for customers, with retailers slow to create offers based on the benefits of smart meters or bundling new technologies such as solar and battery storage systems.
Mr Wood urged government action to make sure Australians get lower prices and better service from their power companies.
This could include requiring companies to tell customers exactly how much they will pay under discount deals and how much extra their bills will be once any discounts end.
"The industry is on notice," he said.
"We may yet see fairer prices, we may yet see better service. But it not, government will have no choice but to return to price regulation."
Prime Minister Malcolm Turnbull acknowledged households and businesses were paying too much for their electricity.
"We are cleaning up Labor's mess by ensuring that electricity is affordable and reliable for households and business," Mr Turnbull said.
"Our government has led the way on putting energy reliability, security and affordability as our top priority."
A report into the sector by Dr Alan Finkel would look at better price transparency, he said.
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