Consumers in Western Australia are charged a flat rate of 25 cents per kilowatt per hour regardless of the time of day.
The state's electricity utility Synergy has now proposed a plan to introduce differential power pricing, with big energy users and those with solar panels on their roofs to be billed more.
Synergy chairman Lyndon Rowe told 720 ABC Perth the current pricing structure was flawed.
"The basic problem we have is that of the electricity that's delivered to the home, about 80 per cent of it is fixed cost, about 20 per cent is variable," Mr Rowe said.
"On the other hand, the tariff you pay - about 20 per cent is related to the fixed charge and about 80 per cent is variable, so it's the reverse.
"What that means is that there are a number of cross subsidies in the tariff structure, so either people being subsidised by other users or people being subsidised by taxpayers."
The move comes just a week after the Grattan Institute released a report recommending similar changes.
The report found many people had paid hundreds of dollars more per year than they should for power, because the system was designed to handle peak demand.
Solar panels costing $280m a year
Three groups of consumers have been identified as contributing to the problem: big energy users, holiday home owners and customers with solar panels.
Mr Rowe said the problem lay with the fixed charge component of the electricity tariff.
"People who have got large houses with big air conditioners, swimming pools on at the same time, a range of appliances on at the same time, they're actually driving the investment in the network, because the network has to be built to cope with that peak," he said.
"The second group are people like myself who have a holiday home, and because of the way the tariff works, the amount they pay per year won't even pay the cost of the network cost, the poles and wires, let alone the cost of the energy actually provided.
That left customers using solar energy.
There are now 170,000 solar PV systems across WA's residential network, with the uptake growing by 1,600 per month, and Mr Rowe said that was costing the State Government $280 million a year in subsidies.
"Because they pay a very low fixed charge and because they reduce their demand considerably, in many cases they're not covering the cost of any of the fixed cost, and in some cases not even covering the fixed cost of connection to the network," he said.
"The problem is those subsidies have to be paid by somebody, and they're either being paid by other users who don't have large air conditioners or PV's on their roof, or by taxpayers."
Poorest suburbs the biggest losers: expert
Sustainability expert Jemma Green said the proposal would penalise those living in lower socio-economic suburbs, which have had the biggest take-up of solar panels.
"It looks at pricing based on recouping money for an energy system that is looking to become less relevant and not really looking at the energy system we need to design for the future," she said.
"[It's] penalising consumers that are trying to generate their own electricity on their rooftops via solar panels.
"There was an assertion when the feed-in tariff came out and it was very high, that the tariff was a form of middle class subsidy, but if you look at where they are located, they're actually in the lower income suburbs.
"People that are lower incomes that are concerned about affordability and if we are now increasing the fixed charge to them, it's really going to have a detrimental impact on the households that can afford it the least."
Currently solar panel users get a feed-in tariff of 7 cents per unit of power they put into the grid.
WA Energy Minister Mike Nahan has recently moved to allow battery storage devices, which are being installed in homes in conjunction with solar panels, to also feed back into the grid and help smooth out the peaks and troughs of solar energy.
But he has previously told the ABC the feed-in tariff would be the same, despite the fact batteries can be used to put power into the grid during peak power usage times, like early morning or evenings.
Ms Green said if the Government was going to bring in power prices for different times of day, it would also need to provide consumers with a higher feed-in tariff from battery storage devices.
"If we are going to move to cost reflective and values-based pricing, the cost of generating power in the peak is very expensive and if consumers are able to provide that power from batteries, then the feed-in tariff for providing that value needs to be reflective of that," she said.
"At the moment the feed-in tariff is just a flat tariff of 7 cents for unit from solar panels or the batteries, but if batteries are assisting us in managing our peak demand, the feed-in tariff needs to be reflective of that."