The Weatherill Government says a proposal that about 1 in 4 customers pay a lower electricity rate should be extended to all customers on market deals.

A draft determination from the Essential Services Commission would significantly reduce the allowance for wholesale electricity costs applying to standing AGL contracts.

A final decision will be made in December and the reduction would take effect from the start of January, if approved.

The lower rate would apply to small businesses and households with standing contracts, rather than market contracts with AGL or other retailers which are not price regulated by the Commission.