The Federal Government is trying to create a safety net on power prices to reduce costs for consumers.

The Australian Energy Regulator (AER) has issued a draft determination on its Default Market Offer, which introduces a standard price from July for customers in NSW, South Australia and southeast Queensland.

The move should see prices drop by about $218 a year for residential customers, and up to $937 for small businesses.

The flat rate “will also act as a reference price, requiring energy retailers to advertise their standing and market offers against a common price benchmark”, Energy Minister Angus Taylor said.

The Australian Competition and Consumer Commission (ACCC) welcomed the reforms, saying they should “bring down electricity prices significantly for over half a million consumers and will help all other customers generally better to compare offers”.

AER Chair Paula Conboy said the new regulations should address the ACCC's findings “that standing offer prices are unjustifiably high and comparing market offers is overly confusing”.