A Senate committee has put forward a raft of ideas to help cut household power bills, including giving consumers the ability to switch off in times of peak demand.

The report found the bulk of price rises over recent years have been caused by significant investments in the distribution network, with a smaller contribution being made by the carbon tax.Finding ways to reduce electricity prices

One of its key recommendations is for the introduction of cost-reflective pricing in conjunction with the rollout of smart meters, which would give households the ability to cut electricity supply when spot prices reach a certain level.

Committee chairman and Labor senator Matt Thistlethwaite said the change would mean that only those people using electricity at peak demand would have to pay.

"Effectively, low-income households without air conditioners are subsidising the cost of high-income households running air conditioners during peak times," Senator Thistlethwaite said. "This is unfair."

Under the proposal, which is based on an idea put forward by the Australian Energy Market Commission, large energy consumers would be required to move to the cost-reflective pricing system.

However, it recommends that smaller consumers have the choice to either opt-in to the scheme or remain on a flat network tariff. Last month, the Productivity Commission released its own report that suggested a move to demand-based pricing could slash household power bills by up to $250 a year. 

The Reducing Energy Bills and Improving Efficiency Report can be found here.