POWER prices are set to plunge by almost 8 per cent from next month due to the planned repeal of the carbon tax.
The Tasmanian Economic Regulator yesterday approved a proposal from Aurora Energy to slash electricity prices from July 1.
The average Tasmanian household will save about $164 on its annual electricity bill, while the typical small business will reap saving of about $136 each year.
Energy Minister Matthew Groom said a drop in power prices would provide welcome relief to people across the state.
"Tasmanian households and small businesses have been drowning under the weight of power price increases," Mr Groom said.
"We've seen increases by more than 75 per cent over the course of the last six years."
Mr Groom said the decrease would help rebuild confidence in the Tasmanian economy, stimulate further investment and growth and ease cost-of-living pressures for Tasmanian households.
The regulator said the proposed abolition of the carbon tax had driven the price reductions.
Repealing the tax is expected to make the wholesale price of power cheaper, with Aurora Energy committing to passing the savings on to customers.
Mr Groom criticised Labor and the Greens for opposing the repeal of the tax, saying households and small businesses had been forced to shoulder the burden of the cost on carbon.
While households will benefit, the change will come at a cost to Hydro Tasmania. The state-owned generator attributed $70 million of a record profit last year to the carbon tax.
State Opposition Leader Bryan Green warned that scrapping the carbon tax would rob state and federal budgets of much-needed revenue.
"Hydro stands to lose hundreds of millions of dollars if the price on carbon is abolished, which is money that won't be available to be spent on health and education," Mr Green said. "The Liberal government has refused to answer questions about what it plans to do in response to both the shortfall in revenue and Hydro Tasmania's financial viability."