The Victorian government is considering forcing the electricity industry to re-regulate power prices in a move which could slice hundreds of dollars off household bills.
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Multiple sources in the electricity sector have confirmed they had been told state Environment and Energy Minister Lily D'Ambrosio plans to press ahead with the re-regulation of prices, with one senior executive predicting it is a "done deal".
Electricity retailers are already gearing up to fight the move, arguing it will hurt smaller players and hit investment in renewable energy.
The move to implement a so-called "Basic Service Offer" is one of 11 recommendations in a review of the electricity sector by former deputy premier John Thwaites. The review was handed to the Andrews government last month, and found prices have soared since the sector was de-regulated in 2008.
A Basic Service Offer would replace more expensive, default "standing offer" contracts and require electricity retailers to provide a 'no frills' electricity deal that represents a reasonable price for energy in the market.
The switch could save the average household more than $200 a year on power bills and likely be a politically popular move.
But re-regulation would also be a dramatic intervention in the free market and a reversal of 20 years of economic orthodoxy, which has seen the state government in Victoria and others around the country sell off electricity assets and encourage competition.
Re-regulation has been met with alarm by some small retailers, who predict it will have the unintended consequence of actually helping the big three energy retailers - AGL, Origin Energy and Energy Australia - and crush smaller players in the market.
Another senior electricity executive said re-regulation of prices would be a "return to 1960s ideology" which would "send smaller players in the retail market broke".
Ed McManus, the chief executive of renewable energy generator Meridian Energy Australia and small retailer Powershop, said his company supported the vast majority of the 11 recommendations in the Thwaites review but re-regulating prices "has the potential to cause significant problems".
"There is no doubt the market could be working better for consumers, and changes should be made so consumers can compare electricity prices, and it should be more transparent," he said.
"Re-regulation of any market is bad for investors. Once you have a regulated price the likelihood of new entrants into the market falls. Second, the smaller retailers are likely to drop out of the market because the nature of a regulated market means its harder for these players to survive. And third, in a regulated environment, players large and small are less likely to invest in innovation."
Mr McManus, whose company operates two wind farms, said less investment in innovation would translate into lower investment in renewable energy.
Fellow small electricity retailers GloBird warned "price regulation will kill small retailers and remove competition" in the Victorian market.
A spokesman for Ms D'Ambrosio did not deny the state government was considering re-regulating electricity prices.
"The independent bipartisan review clearly found that the energy market is not working in the best interest of consumers. The Andrews Labor government will respond to its findings by the end of the year," he said.
The re-regulation proposal - and other measures designed to improve transparency and information available to customers - is due to go to state cabinet in a matter of weeks.
