But other savings will be much more modest. Also in the Essential Energy area, Origin Energy customers will save $83 a year by moving from the standing offer to the default price.
AGL customers in the Ausgrid area are set to save $104 a year while Origin customers in the same area will save $86.
Click Energy customers stand to be the biggest winners. A Click Energy customer supplied through the Ausgrid distribution network could save up to $521 between their standing offer and the default price.
Most people buy through AGL, EnergyAustralia or Origin Energy. The system will not directly affect people who are on discount offers from their retailer.
A small number of customers who buy through People Energy in the Ausgrid network and those with Powershop and Simply Energy in the Essential system may not be affected as their standing offers are already below the default price.
Treasurer Josh Frydenberg and Energy Minister Angus Taylor on Saturday said households would soon enjoy lower energy bills on the back of the changes.
«For too long, the energy companies have been taking advantage of loyal Australian families and small businesses who have been paying the highest electricity prices on the market,» they said.
«The government is removing the energy companies’ loyalty tax and delivering lower, fairer prices.»
The default price was recommended by the Australian Competition and Consumer Commission in a report into electricity pricing released in July last year.
Then prime minister Malcolm Turnbull committed to the proposal at the same time as he jettisoned his signature energy and carbon emissions policy, the National Energy Guarantee, in the days before he was ousted.
The desire among some Coalition MPs for direct action on power prices, and their opposition to the energy guarantee, was ultimately the issue around which Home Affairs Minister Peter Dutton’s unsuccessful leadership challenge was organised.
Mr Morrison ultimately succeeded Mr Turnbull in the final party room vote and maintained the commitment to the default price, promising consumers «fair dinkum power».
The lower prices won’t start until July 1, after the federal election expected in May.
The ACCC will monitor retail price settings to ensure companies do not increase better offers to other customers to offset the reduced margins on their standing offer customers.
Businesses may do better than households, with savings of up to $937 for small firms on a flat rate tariff.
The Australian Energy Regulator, in its report outlining the changes, said it had sought to create a system that would still offer incentives to retailers to lower their prices.
«We have sought to set [default] prices at a level that provides consumers and retailers with incentives to participate in the market, while allowing retailers to recover their efficient costs in servicing customers,» it said.
The changes will not apply to Victoria where the Andrews government has promised to set up its own default price system.
The ministers warned Victoria must deliver real savings to households and businesses.
«Victorian consumers must be better off under Victoria’s default price or the Commonwealth will take further action to ensure Victorian electricity customers are put first,» they said.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Michael Koziol is a political correspondent for The Sydney Morning Herald and The Age.