Households could save more than $400 a year on power bills under a major shake-up of Australia’s “broken” electricity market, proposed by the consumer watchdog.

The Australian Competition and Consumer Commission released its long-awaited report into the energy sector on Wednesday, detailing ways to tackle skyrocketing power costs.

It estimates bills could be slashed by 20 to 25 per cent for the average household if the report’s 56 recommendations are implemented.

ACCC chair Rod Sims said serious affordability problems for consumers and businesses had been caused by poor policy decisions over the past decade.

“The national electricity market is largely broken and needs to be reset,” Mr Sims said.

More than two million small and medium businesses could save an average of 24 per cent on their bills under the ACCC’s recommendations.

Commercial and industrial customers could see electricity costs drop by 26 per cent.

The ACCC’s wide-ranging investigation into retail energy found the current situation is unacceptable and unsustainable.

The consumer watchdog wants the Australian Energy Regulator to be given more powers to target market manipulation.

Customers should be able to compare discounts from a default or benchmark rate set by the regulator.

Energy Minister Josh Frydenberg said the Turnbull government would carefully consider the report’s recommendations in consultation with state and territory governments.

“There is good news for consumers out of these recommendations, which the ACCC has said will reset the market and drive power prices lower,” Mr Frydenberg told Sky News on Wednesday.

The Prime Minister Malcolm Turnbull also weighed in saying: “Too much ideology and even idiocy has taken the place of engineering and economics, and energy consumers have suffered accordingly.”

The report found there should be a cap on any further mergers or acquisitions by a company with more than 20 per cent market share.

It also recommends governments effectively underwrite the construction of new dispatchable power sources by guaranteeing long-term contracts for large industrial and commercial users.

Mr Frydenberg said the government would carefully consider that recommendation, saying it identified market failures where companies struggled to get finance.

Labor energy spokesman Mark Butler said power prices had skyrocketed under Malcolm Turnbull, arguing divisions within the coalition had led to uncertainty.

“The ACCC report is the culmination of Malcolm Turnbull’s failures to produce an energy policy that his party room will allow him to tick off on,” he said.

The ACCC inquiry was commissioned in March 2017 by Treasurer Scott Morrison.

-AAP