POWER bills could be slashed by up to $400 under a new government bid to crackdown on big energy companies.

Energy Minister Angus Taylor will today announce the government plans to set a default price for electricity in line with a recommendation from the Australian Competition and Consumer Commission's inquiry into retail power prices.

The Australian Energy Regulator will start work immediately to require power retailers to set their prices against a default market price.

This could help households save hundreds of dollars, and businesses thousands.

"The default offer will ensure customers are not being exploited by being loyal to a service provider," Minister Taylor said.

The government will also introduce a reference bill for each region under which electricity retailers will be required to calculate and advertise their discounts using a common reference point.

This will help customers to clearly compare offers to find the best deal.

A report by the Australian Energy Market Commission found customers on standing offers could be paying up to $832 per year more than the cheapest market offer in South Australia.

The figures for other states were: Victoria ($652), NSW ($411), Queensland ($369) and ACT ($273). Tasmania already has a regulated standing offer.

For small businesses the price differences range from $969 to $3457. Mr Taylor will meet with his state and territory counterparts in Sydney on Friday to discuss co-operation and law changes.