Malcolm Turnbull has refused to rule out further regulating electricity prices to get a better deal for consumers as energy retailers declared his new inquiry will "bust the myth" there is any price-gouging in the market.
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The government said the Australian Competition and Consumer Commission investigation could ultimately save households hundreds of millions of dollars by empowering consumers with better transparency and choice.
Consumer groups welcomed the move but Labor, and crossbench kingmaker Nick Xenophon said it was too little too late.
The latest phase in the electricity debate came as new opinion polling on power generation finds nearly two-thirds of Australians want the country to move away from coal and embrace other energy sources.
The Fairfax-Ipsos poll shows just 33 per cent of Australians believe the country should continue to make use of coal-generated power in the future and 61 per cent believe we should rely only on other energy sources.
Support for continued coal-generation of power is higher in NSW (38 per cent) and Queensland (37 per cent), and also higher in non-metro areas (37 per cent compared to 31 per cent in cities).
Coalition voters are sharply divided on the issue, with 51 per cent supporting continued use of coal and 43 per cent advocating other sources. The majority of Labor (70 per cent) and Green (93 per cent) voters believe coal should be relegated to the past.
However, Resources Minister Matt Canavan said Australia had the highest-quality coal in the world and it would continue to be part of the energy and export mix for a long time to come.
"We're lucky that God has given us very high-quality coal, and we should make it available to the rest of the world to provide power, to help other economies create economic growth," he said on Monday.
Officially announcing his ACCC inquiry, Mr Turnbull refused to rule out further regulating the industry to keep prices down.
"There is a lot of regulation in the electricity market already," he pointed out. "You'll no doubt see recommendations from this ACCC review and we will obviously take them all on board and consider them very carefully."
Mr Turnbull pointed to a Grattan Institute report that found there were excessive profit margins being made by electricity retailers, and recommended the government re-regulate the sector to protect consumers.
But the energy sector's peak body, the Australia Energy Council, said they were confident the inquiry "will bust the myth that competitive retail electricity markets are the problem".
Chief executive Matthew Warren said prices were rising "because we are running out of electricity" as a result of inconsistent policy.
"Competitive retail electricity markets are working effectively and efficiently, delivering choice and savings," he said. "Retail margins are variable, competition is cut-throat. The absence of other major retail businesses in the electricity market shows how tough this market is to operate in successfully."
Competition cannot guarantee the lowest possible price for every customer at any point in time, nor can it guarantee that prices will not rise overall, he said.Labor welcomed the government's "belated" announcement.
But crossbench senator Nick Xenophon said the inquiry would not cut it, given it is not due to report until mid-2018.
"Twelve months is too long to wait for the thousands and thousands of businesses around this country that are on a knife-edge because of energy costs in Australia," he said.
Rosemary Sinclair from Energy Consumers Australia said the inquiry would investigate whether the market was working for consumers, pointing to the complicated way retail electricity offers are often structured.The Ai Group said the inquiry would help get to the bottom of how the retail electricity market was performing.
