A new price safety net is expected to drive down power bills for about 800,000 customers.
The Australian Energy Regulator on Tuesday issued its ruling on default prices for customers in NSW, southeast Queensland and South Australia which from July will be set at a level to protect consumers who don't shop around.
It won't apply in Victoria, where the state government has already put in place its own similar measure.
"Standing offers are no longer working as they were intended and this is causing financial harm to disengaged consumers," AEC chair Paula Conboy said.
"Our final decision will bring down bills for most people on those offers."
The annual savings from a standard standing offer bill for residential customers will be between $129 and $181 for NSW, $118 for southeast Queensland and $171 for SA.
It will also reduce prices by up to $896 a year for small business customers who are on standing offers.
The default market offer will be used as a reference bill from which all discounts must be calculated.
However, Ms Conboy said market offers would almost always be cheaper than the default market offer and consumers should shop around using websites such as the government's EnergyMadeEasy.
The Australian Energy Council's chief executive, Sarah McNamara, said the default market offer would be of benefit to about 14 per cent of customers in SA, NSW and southeast Queensland.
"Significantly, for the 86 per cent of customers who are already on a cheaper market deal, today's announcement will not lower prices," she said.
"Any customer who remains on the default price, regulated or not, will be paying more than they need to."
However, the peak body said the AER's approach gives the retail market the best chance of continuing to deliver competition and better deals.
Federal Energy Minister Angus Taylor said the competition watchdog would be watching retailers to ensure they provide their customers with a fair deal and not increase better offers to offset the loss of excessive margins from standing offer customers.
