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Australian households and small businesses could save hundreds of dollars from their annual electricity bills, with AGL announcing a price safety net to begin next year.

After one year on a standing offer, households and small business will automatically get a more affordable deal, bringing their rates closer to prices on AGL’s discounted market offers.

It is expected to help more than 150,000 individuals and 27,000 small businesses, the energy provider told AAP on Friday.

Individuals could save up to $180 each year and businesses up to $340.

The move has been welcomed by Energy Minister Angus Taylor, who says rising power prices are hurting household budgets and stalling small business growth.

‘Current standing offer prices are a ‘loyalty tax’ on those who have stayed with their energy company or don’t have time to shop around for a better deal,’ he told AAP.

‘Customers should be rewarded for loyalty, not punished. AGL have recognised this and have heeded the government’s calls to put customers first.’

The energy minister is now calling on other power companies to follow AGL’s lead.

The provider’s interim CEO Brett Redman says the safety net will apply to customers who do not seek out a better deal.

‘At any time, customers can get in touch to seek a better deal and we encourage them to do so,’ he says.

Savings will differ state to state, with households and small businesses in Victoria and NSW to see a 10 per cent reduction in their bills, compared to seven per cent in SA and five per cent in Queensland.