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The competition watchdog has released the rules guiding its “big stick” for energy companies.

The rules offer guidance to electricity generators, retailers and those who do both on how the Australian Competition and Consumer Commission intends to wield the powers parliament handed it in November.

The new laws, which come into effect on June 10, ensure electricity retailers pass on reduced costs through lower power bills and stop “gentailers” from using their market power to hurt competition.

ACCC head Rod Sims says the laws will start at a time when energy affordability is a pressing issue for many households and businesses.

“Wholesale prices have reduced significantly over the past couple of months, so retailers should be assessing their prices and ensuring that they are prepared when the new laws come into effect in June,” he said on Monday.

“These new laws will enable us to take electricity companies to court if we have evidence that they are engaging in prohibited conduct in breach of these new provisions.”

The guidelines released on Monday give energy companies examples of situations that would warrant use of the big stick and those that are acceptable.

Energy Minister Angus Taylor said the laws couldn’t be starting at a more important time, amid the coronavirus economic crisis.

“It is important these wholesale price reductions are passed on to consumers, and the big stick will ensure that,” he told AAP in a statement.